25% TAX to Sell a Rental Property?! | How Depreciation Recapture Works for Investment Real Estate

Karlton DennisSep 20, 202413m 11s47.0K viewsScore 85
Regulations & Compliance
advanced
depreciation recapture
real estate taxes
capital gains tax
1031 exchange
tax strategy
M

Summary

AI-generated

Understand depreciation recapture taxes for real estate investors, including how it's calculated, its impact on capital gains, and strategies to defer or avoid it. Learn about Section 1245 vs. Section 1250 and how holding property long-term or using 1031 exchanges can mitigate these taxes.

Key insights

  • Inherited real estate properties are exempt from depreciation recapture taxes because beneficiaries receive a stepped-up basis to the current market value at the time of inheritance.

Mistakes to avoid

  • Not understanding depreciation recapture can lead to hesitation in investing in real estate or unexpected tax liabilities upon selling a property.

Tools & resources

  • Cost Segregation Tax Savings Calculatortool

    A cost segregation tax savings calculator can help estimate potential tax benefits from depreciating real estate assets.

Frequently Asked Questions

Curated by Learn STR by GoStudioM · Summary & key insights generated by AI · Reviewed by editorial