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Entering Section 1250 depreciation recapture

by Intuit• Updated 3 months ago

For more depreciation resources, check out our Tax topics page for Schedule C where you'll find answers to the most commonly asked questions.

When entering the sale or disposition through ProConnect Tax The Section Deductions

Description of Property
Which Form to attach the depreciation to
Activity name or number (if more than 1 schedule to attach)
Category of Asset
Date Placed in Service
Cost or Basis
Current Section 179
Method (this is what will determine the type of depreciation taken)

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

Depreciation Method, the program doesn't recapture depreciation for section 1250 real property (85, 87) or straight-line methods (71, 81, 89, 83). For ACRS accelerated real property methods (70, 80, 82), 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 properties disposed of at a gain. The amount of gain treated as ordinary income is calculated based on how long the property was held.

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 are depreciable. However, Section 1250 refers to real property, such as buildings, rental properties or warehouses. Land isn't 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 times the portion of the additional depreciation attributed to periods after 1975 OR the applicable percentage times the total gain. The additional depreciation is the excess of actual depreciation over the depreciation figured using the straight-line method

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

How is the applicable percentage determined?

The applicable percentage used depends on whether the real property being sold or disposed is nonresidential real property, residential rental property, or low-income housing property. The date placed in service of these properties will determine the percentage that needs to be used. See Pub 544 for the appropriate percentages.

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