Depreciation Recapture Calculator (Excel XLSX)

This one goes out to all you Accountants out there. The most common place you see recapture happening is in real estate. This is because property is depreciated and then sold for above book value at some point in the future.

When the sale happens, there are taxes owed on the depreciation expense that was taken since the property's inception. The same goes for any property, plant, or equipment sold above book value. Depending on the depreciation method used, the tax rate applied to that depreciation figure can vary. Sometimes, more aggressive depreciation methods will have higher tax rates, but if regular straight lined method is used, then it is often capped at 25%.

There are lots of nuances to this calculation, for example the capital loss can offset the gain from book value (cost basis is $100 > depreciation $15 over time > sell for $90. That means a $10 capital loss, but a $5 gain from book value to sale price. The $10 loss offsets the $5 gain and you still have $5 of capital losses.

As you can see, the amount of depreciation that has happened and the sale price are going to mean a different tax effect for each future period. The model makes it easy to see what happens at any future period (I went up to 600 total periods so it can handle any situation).

The main output columns are:
•  Net Taxable Depreciation Recapture
•  Remaining Capital Gains/Losses After Recapture Offset

The main inputs are:
•  Purchase price or cost basis
•  Depreciation Expense per Period
•  Sale Price Expected (entered for each future period)