Recapture

Definition

IRS taxation of previously claimed depreciation deductions when a property is sold—the tax agency's way of clawing back your deductions.

Example Usage

Upon sale, the investor had to pay recapture taxes on the $100,000 in depreciation claimed over five years.

Origin

Internal Revenue Code terminology, part of tax policy since the 1960s

Fun Fact

Depreciation recapture ensures that tax benefits aren't free—the IRS eventually gets its money back.

Source: Internal Revenue Service (IRS) Standards

Related Terms

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egress

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assessing

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corridor

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due diligence period

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