Depreciation Recapture

Tax charged on the write-offs you already claimed when you sell the asset for more than its written-down value.

When a business depreciates an asset it deducts part of the cost each year, lowering the asset's book value and its tax bill. If the asset later sells for more than that reduced value, the earlier deductions are effectively reversed and taxed, often at a higher rate than a normal capital gain. It most commonly surprises owners of rental property at sale.

Selling the rental property triggered depreciation recapture on the deductions taken over the previous decade.