Unrecaptured Section 1250 Gain Tax Rate

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Unrecaptured Section 1250 Gain Tax Rate

Shafi Noss
Lender · Nationwide · Member since 2018 · 571 posts · 310 votes

Hi everyone, does anyone know if there is graduation for the unrecaptured section 1250 gain for selling depreciated real estate? A lot of sources say it caps at 25% but I am wondering if that is flat or not. 

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Eamonn McElroy
Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
6y

Wayne is correct.  Up to 25%.  25% max.  Take your pick.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    6y

    Your current individual tax rate determines this, “up to 25%”.

    1Reply
  • Lance LvovskyPro Member
    Accountant · Fort Lauderdale, FL · Member since 2013 · 1k+ posts · 753 votes
    6y

    @Shafi Noss

    25% is correct.

    1Reply
  • Eamonn McElroy
    Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
    6y

    Wayne is correct.  Up to 25%.  25% max.  Take your pick.

    2Reply
  • Shafi Noss
    OP
    Lender · Nationwide · Member since 2018 · 571 posts · 310 votes
    6y
    Cool, didn't know if it scaled differently like long term capital gains does. Thanks for the answers. 
    0Reply
  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    6y

    @Shafi Noss

    Without an example, I can't be sure we're on the same page.

    Say you bought a property for $200k 10 years ago, depreciated $50k of it, and are selling it for $300k now.

    You have a $150k capital gain, $50k of which is taxed under 1250 recapture rules, and $100k under long-term cap gains rules.

    Now, a mathematically flawed example below, just to illustrate the concept. In reality, it is more complicated.

    • If you're in a 12% bracket, your $50k will be taxed at 12%, and your $100k at 0% .
    • If you're in a 24% bracket, your $50k will be taxed at 24%, and your $100k at 15% (maxed out for moderate AGI).
    • If you're in a 35% bracket, your $50k will be taxed at 25% (maxed out), and your $100k at 20% (rate bump at high AGI).
    1Reply
  • Shafi Noss
    OP
    Lender · Nationwide · Member since 2018 · 571 posts · 310 votes
    6y

    I appreciate the thoroughness @Michael Plaks, that's what I took from the other answers as well. 

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