Depreciation Recapture

Depreciation recapture is the IRS mechanism that taxes previously claimed depreciation deductions when a commercial property is sold, typically at a 25% rate under Section 1250, converting paper losses back into taxable income at closing.

Depreciation Recapture is a key concept that affects property valuation, financing decisions, and investment returns in the triple net lease market. Understanding Depreciation Recapture helps investors make informed acquisition and management decisions.

Depreciation Recapture directly influences how commercial properties are valued, financed, and traded. Changes in Depreciation Recapture can impact cap rates, NOI calculations, and overall investment performance for net lease properties.

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