Depreciation Recapture Explained: 1031 Exchanges, Bonus Depreciation, and Tax Planning

In this video, we break down one of the most misunderstood topics in real estate investing: depreciation recapture. Most investors understand the benefits of depreciation when they purchase investment property. Depreciation can help reduce taxable income and improve cash flow during ownership. What many investors do not fully understand is what happens when the property is sold. We explain how depreciation recapture works, why the IRS seeks to recover prior depreciation deductions, and how depreciation recapture differs from capital gains tax. We also discuss why understanding your adjusted cost basis is critical before putting a property on the market. In addition, we cover how Section 1031 may allow investors to defer both capital gains and depreciation recapture when reinvesting in qualifying real estate. Finally, we discuss how the return of 100% bonus depreciation has created additional planning opportunities for certain investors, including those dealing with partial exchanges, taxable boot, or failed 1031 exchanges. We explain how some investors evaluate bonus depreciation strategies as part of a broader tax planning approach. The most important takeaway: know your numbers before you sell. Understanding your capital gains, depreciation recapture exposure, and available planning options can help you make more informed decisions and avoid surprises. Want to learn more? I'm always happy to answer any questions you or your clients may have about how to best leverage DSTs during a 1031 exchange to maximize your investment goals! www.1031Financial.com/Contact #DST #1031Exchange #RealEstateInvesting Disclosure: DST investments are speculative, illiquid and can expose investors to risks including the potential loss of the entire investment principal, potential property value loss, foreclosure and loss of management control. Past performance is not a guarantee of future results. Securities offered through 1031 Securities Inc., member FINRA / SIPC. 1031 Securit

Added 13 Jun 2026