Depreciation Recapture Law and Legal Definition

Depreciation recapture is an income tax rule in which a gain on the sale of property is treated as ordinary income, or partly as ordinary income, to the extent of depreciation taken on the property. When an asset is sold, gain is taxed as ordinary income up to the amount of depreciation claimed and to the extent of the excess of accelerated depreciation claimed over straight-line depreciation that would have been allowed. This ordinary income treatment is referred to as depreciation recapture.