Recapture is a higher rate of tax, often on the depreciation that you took on a property. When you buy a building or improvements on real estate you’re allowed to recoup your outlay over a long period of time. A multi-family property like an apartment building is depreciated over 27 and a half years. A commercial building like a medical office is depreciated over 39 years. Over that long period of time you’re going to recoup your outlay by taking deductions on your tax return. These are non-cash losses that are very valuable when you’re doing your taxes. However, they have the inverse effect of lowering your basis, which is not great because when you sell the property your gain is determined by the difference between your adjusted basis and your net selling price. So you’re going to pay more in gains when you dispose of the asset because you’ve enjoyed these depreciation deductions over the years. By the way, depreciation is not an elective thing. You have to take it if you hold the property for investment or business purposes.
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