What is depreciation recapture?<\/p>\n
I feel like this is a topic that is not talked about enough.<\/p>\n
Many of you are familiar with the benefits of rental real estate.<\/p>\n
You can buy (or invest in) a property, rent it, have positive cash flow ($$$ for you), and still not pay tax on it – since you get to take depreciation expense each year.<\/p>\n
Sounds cool, and it is.<\/p>\n
But what happens when you sell this property?<\/p>\n
If you bought it for $800,000 and you sell it for $1,000,000, your gain is $200,000, right?<\/p>\n
Wrong.<\/p>\n
The IRS says you cannot claim depreciation each year (reducing your income tax each year) and then sell it for a profit without “repaying” the IRS.<\/p>\n
Without getting too technical, in effect, when you sell, you will need to recognize all of the depreciation (that you expensed over the years) as additional profit on the sale.<\/p>\n
Yes, there are potential ways to defer this recognized gain (such as a 1031 exchange), but everyone who invests in rental real estate needs to be aware of the depreciation recapture concept.<\/p>\n","protected":false},"excerpt":{"rendered":"
What is depreciation recapture? I feel like this is a topic that is not talked about enough. Many of you are familiar with the benefits of rental real estate. You can buy (or invest in) a property, rent it, have positive cash flow ($$$ for you), and still not pay tax on it – since […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"yoast_head":"\n