Glossary

Section 1250 Property

Depreciable real property — land improvements integral to a building and the building structure itself — distinguished from Section 1245 property by its use of straight-line MACRS depreciation and its more favorable recapture treatment on sale.

Because real property depreciation has been straight-line since 1986, Section 1250 recapture in practice applies only to the 'unrecaptured Section 1250 gain' — the accumulated straight-line depreciation taxed at a maximum 25% federal rate rather than ordinary rates — generally more favorable than the full ordinary-income recapture that applies to Section 1245 property. This differential treatment is precisely why cost segregation studies matter: shifting basis from 1250 into 1245 categories accelerates deductions today at the cost of harsher (ordinary-rate) recapture later, making the studies a timing and rate-arbitrage strategy rather than a permanent tax reduction.