Entering Section 1250 depreciation recapture in ProConnect Tax

When entering the sale or disposition through Input Return ⮕ Deductions ⮕ Depreciation,

ProConnect Tax uses the Depreciation Method entered to determine what type of property the asset is.

Follow these steps to enter Section 1250 depreciation recapture in the Individual module:

1. Go to Input Return ⮕ Deductions ⮕ Depreciation.
2. Select Add.
   • Under the Depreciation (4562) section, enter the Description of Property.
3. Scroll down to the Asset Information section.
4. Under the General Information subsection, fill out the applicable fields.
5. Under the Regular Depreciation subsection, fill out the applicable fields.

For the Depreciation Method, the program doesn't recapture depreciation for section 1250 real property or straight-line methods. For ACRS accelerated real property methods, the program recaptures the excess of accelerated depreciation over straight-line. Check out this article for information on depreciation methods.  

Commonly asked questions about Section 1250

What types of assets qualify for Section 1250 depreciation recapture?

Section 1250 depreciation recapture applies to depreciable or amortizable real property disposed of at a gain. The amount of gain treated as ordinary income is calculated based on how long the property was held and the amount of additional depreciation taken.

Realty properties purchased after 1986 aren't eligible for Section 1250 depreciation recapture. Refer to this IRS resource for more information about Section 1250 depreciation recapture.

What types of properties are depreciable?

Any property purchased for business or investment purposes may be depreciable. However, Section 1250 specifically refers to depreciable real property, such as buildings, rental properties, and warehouses. Land is not depreciable.

How much of the gain is treated as ordinary income?

For properties held more than one year, the amount of gain treated as ordinary income equals the applicable percentage multiplied by the portion of additional depreciation attributed to periods after 1975, or the applicable percentage multiplied by the total gain — whichever is less. Additional depreciation is the excess of actual depreciation over the amount that would have been calculated using the straight-line method.

For properties held one year or less, all depreciation taken is treated as additional depreciation.

How is the applicable percentage determined?

The applicable percentage depends on whether the real property is nonresidential real property, residential rental property, or low-income housing property. The date the property was placed in service determines which percentage applies. See IRS Publication 544 for the appropriate percentages.