I guess MANY MANY TPs get confused on between sec 1250 expensing and unrecaptured depreciaiton taxed as ordinanry incoem at 25% ;correct you need to recapture sec 1250 depreciation; but rememebr; Section 1250 depreciation recapture differs in that the maximum tax rate that applies is currently 25 % The recapture applies to the full amount of the original cost that you claimed as depreciation on the rental home.as you said,
Use Form 4797 Part III to report the gain on the sale of the home. Note that line 26 relates to ordinary income recapture and does not apply to your sale. Instead the 1250 recapture is used when applying the tax rates using Sch D and f 8949 (when you get 1099-S).
The IRS calculates recapture on the depreciation that you were legally allowed to claim whether or not you actually claimed it. The best way to get out of paying recapture is to use the proceeds from the sale of your rental property to buy another piece of investment property that is the same size or larger. Structuring your transaction as a 1031 exchange and following the IRS's rules for that process lets you carry your proceeds, and your tax basis, forward into a new property without paying depreciation recapture or capital gains taxes.actually, Sec 1250 recapture may apply when residential rental real property was acquired after 1975 and before 1987 and accelerated depreciation was taken. Gain, I mean net gain, on the disposition of section 1250 property is treated as ordinary income to the extent of additional depreciation allowed or allowable on the property.however, You will not have additional depreciation if the property was residential rental property placed in service after 1986 (or after July 31, 1986, if the choice to use MACRS was made); you held it longer than 1 year; and, if the property was qualified property, you made a timely election not to claim any special depreciation allowance. These properties are depreciated using the straight line method. But you still must recapture unrecaptured depreciation taken previously even under S/L method as ordinary income just like sec 1250 depreciation .