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Entering Section 1250 depreciation recapture

by Intuit Updated 2 weeks ago

When entering the sale or disposition through Screen 22, Depreciation, Lacerte and 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 Screen 22, Depreciation.
  2. Click Add from the left navigation panel.
    • If using ProConnect Tax, click the Details button.
  3. Under the Depreciation (4562) section, enter the Description of Property.
  4. Scroll down to the Asset Information section.
  5. Under the General Information subsection, fill out the applicable fields.
  6. 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 (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

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.

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.

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.

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.

Lacerte TaxProConnect Tax

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