Once and for all: Are “Unrecaptured Section 1250 Gains” taxed at long-term capital gain rates (but with a special 25% highest rate/bracket), or are they taxed at ordinary income tax rates (but capped at 25%)?
This is a special rate for long-term capital gain, not a special rate for ordinary income. We know this two ways:
The name says this gain is “unrecaptured,” meaning we haven’t applied ordinary rates to the gain.
We’re allowed to use capital losses (including “normal” long-term capital losses) to offset this gain without regard to the $3,000 capital loss limitation (see Schedule D).
thank you for your professional answer!
This reply was modified 2 years, 11 months ago by Kaye Thomas.
An unrecaptured section 1250 gain is an income tax provision designed to recapture the portion of a gain related to previously used depreciation allowances. It is only applicable to the sale of depreciable real estate. Unrecaptured section 1250 gains are usually taxed at a 25% maximum rate.