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Old 01-13-2013, 02:52 PM
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25% Depreciation recapture is higher than the tax rate in the years we took the depreciation

We bought a house in 2001 for 83133.
Sold it 2012 for 65630.
Depreciated 31760 over 11 years.

We are having to pay a 25% recapture rate for the depreciation now which after all the calculation is $14257.... but in the 11 years that we took the depreciation we were only in a 15% tax bracket. Am i wrong or are we getting screwed???
Also 2012, is the first year we are in a higher tax bracket because I went back to work after being a stay at home mom for 9 years.
Thank you for any advice!



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Old 01-14-2013, 05:26 AM
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Join Date: Oct 2010
Posts: 5,230
“We are having to pay a 25% recapture rate for the depreciation now which after all the calculation is $14257.... but in the 11 years that we took the depreciation we were only in a 15% tax bracket. Am i wrong or are we getting screwed???”----->It depends; a special 25% tax rate applies to real pty. Gains attributable to depre previously taken and not already recaptured under sec 1245/1250 rules. Any remaining gain attributable to unrecap depre previously taken, including S/L depre, is taxed at 25% rather than the LTCG rate of 0~15% for 2012. When your ordinary tax rate is only 10~15%, the depre recap will be taxed at 10 or 15% to the extent of the remaining amount in the 10 or 15% bracket and then at 25%.
“Also 2012, is the first year we are in a higher tax bracket because I went back to work after being a stay at home mom for 9 years.”--->As described above.



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