when personal property is sold at a gain, the gain is ordinary income to the extent of depreciation previously deducted; when real property is sold at a gain and accelerated depreciation has been claimed, the taxpayer may be required to pay a tax at ordinary rates to the extent of the accelerated part of depreciation or in some cases for all of the depreciation taken.

when real property is sold at a gain and accelerated depreciation had been claimed, the owner may be required to pay a tax at ordinary rates to the extent of the excess accelerated depreciation. Excess depreciation on residential real estate after 1980 is recaptured; all depreciation on commercial property after 1980 is recaptured when an accelerated method had been used, under section 1250 of the Internal Revenue Code . See Figure 47.

Note: The importance of depreciation recapture for real estate was minimized by the Tax Reform Act of 1986, which mandated straightline depreciation for buildings bought after 1986.