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7 Ways to Take Control of Your Legacy

Planning your estate might not sound like the most exciting thing on your to-do list, but trust us, it’s worth it. And with The Investor’s Guide to Estate Planning, preparing isn’t as daunting as it may seem.

Inside, you’ll find {straightforward advice} on tackling key documents to clearly spell out your wishes.

Plus, there’s help for having those all-important family conversations about your financial legacy to make sure everyone’s on the same page (and avoid negative future surprises).

Why leave things to chance when you can take control? Explore ways to start, review or refine your estate plan today with The Investor’s Guide to Estate Planning.

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The Truth About Depreciation Recapture

There’s a moment every investor eventually faces: the sale went great, the numbers look strong, you’re feeling like a financial wizard… and then your tax pro clears their throat and asks, “So what did you depreciate on this property?”

This is the part of the movie where cheerful music fades and the violin section starts tuning up ominously.

Let’s clear this up so tax season doesn’t feel like a horror film.

What Depreciation Recapture Actually Is

When you own a rental property, the IRS lets you deduct a portion of its value each year to represent “wear and tear.”

This deduction:

• lowers your taxable income,

• lowers your tax bill,

• and increases your cash flow.

It’s a good thing.

A beautiful thing.

A thing you want to take.

But when you sell the property, the IRS wants to reconcile those earlier benefits.

They do this through something called depreciation recapture.

Here’s the key point most investors miss:

You ONLY repay (recapture) the depreciation you actually took.

NOT repairs.

NOT maintenance.

NOT utilities.

NOT property taxes.

NOT insurance.

NOT contractor bills.

Those were real expenses.

You do NOT pay those back.

You only recapture depreciation — which was a non-cash deduction that reduced your tax basis.

How Recapture Works (The Simple Version)

• Every year you take depreciation, your “basis” drops.

• When you sell, the IRS looks at your gain compared to that reduced basis.

• The portion of the gain tied to depreciation is taxed — usually at up to 25%.

That’s it.

No tricks.

No hidden traps.

Just accounting cleaning up after itself.

Why This Matters When You’re Running the Numbers

If you sell a rental you’ve owned for years, a portion of your gain will be taxed more heavily than standard long-term capital gains.

That isn’t a disaster — it just means you need to plan for it upfront.

Professionals model recapture before they buy, not after they sell.

How to Avoid Recapture (Legally)

• 1031 Exchange — defer both capital gains and recapture

• Keep the property — recapture only happens on sale

• Step-Up in Basis — when property transfers at death

Three tools, three very different strategies.

Each worth discussing with your CPA before you sell.

The Bottom Line

Depreciation recapture isn’t a penalty.

It’s simply the IRS saying, “We gave you a tax break. Now let’s square up.”

Handle it wisely and it won’t ruin your day — or your profit.

Smart investors expect it.

Rookies learn about it… loudly… on April 15.

Editor’s Note:

Nothing in this article constitutes legal, financial or investing advice. This is intended as educational content only. Be sure to consult with your tax advisor or other professionals when planning your specific strategy.

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