>People sometimes get into trouble with this if they rapidly depreciate real estate and then sell it. Even if you sell for less than your purchase price it is possible to owe taxes.

But in the U.S. you can't rapidly depreciate real estate, it is generally straight-line over 27.5 or 39 years (residential vs. non-residential). The gain on real estate due to depreciation is technically referred to as Section 1250 gain, and if there is no gain (which is calculated against your adjusted basis, not purchase price), then it follows that there is no Sec. 1250 gain (often mistakenly called "depreciation recapture").

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jeffreyrogers 3 hours ago | parent | next [-]

No, you can do cost segregation to classify some of the real property as Section 1245 (which is accelerated vs Section 1250). People doing this and then selling is how they get unexpected tax bills.

	▲	MichaelFeldman an hour ago \| parent [-]
		The “unexpected tax bill” usually comes from people not realizing they pulled those deductions forward earlier. Also worth noting, if you don’t sell (or you 1031), that recapture can be deferred, which is why a lot of investors still use cost segregation aggressively. This is a pretty clear breakdown of how 1245 vs 1250 recapture actually works on sale if anyone wants the full picture: https://notaxcompromise.com/cost-segregation/depreciation-re...

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CGMthrowaway 3 hours ago | parent | prev [-]

Cost seg