Glossary

Unrecaptured Section 1250 Gain

The portion of long-term capital gain on the sale of depreciable real property attributable to straight-line depreciation previously claimed, taxed at a maximum federal rate of 25% rather than the standard long-term capital gains rate.

This category sits between ordinary income recapture, which applies to Section 1245 property, and standard capital gains treatment, which applies to any remaining appreciation above the original, undepreciated cost basis — meaning a single property sale often produces three tiers of gain taxed at three different rates: ordinary rates on 1245 personal property recapture, a maximum 25% rate on unrecaptured 1250 gain, and a maximum 20% rate on the balance. Because MACRS real property depreciation has been straight-line only since 1986, essentially all depreciation claimed on the building shell falls into this 25% bucket at sale, making it the single most reliable and largest component of the 'recapture' conversation for a stabilized, long-held CRE asset even without any cost segregation study having been performed.