Taxation of Unrecaptured Section 1250 Gains

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  • #1374
    snargle
    Participant

    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%)?

    #1398
    Kaye Thomas
    Moderator

    This is a special rate for long-term capital gain, not a special rate for ordinary income. We know this two ways:

    1. The name says this gain is “unrecaptured,” meaning we haven’t applied ordinary rates to the gain.
    2. 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).
    • This reply was modified 1 year, 9 months ago by Kaye Thomas.
    #1634
    Bollo
    Participant

    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 1 year, 8 months ago by Kaye Thomas.
    #7247
    Lewis-H
    Participant

    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.

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