Tax Guru-Ker$tetter Letter

Thursday, November 25, 2004

Recapture of Section 179

I received this in response to an earlier Q & A.

Kerry,
You used 25% as the recapture tax rate. Is this the case even if the owner's tax rate is actually lower. Would it not be taxed at the rate of the owner upon sale of the asset?
Thank you.

My response:

While 25% is the maximum Federal tax rate on most depreciation recapture, and what we use for quick and dirty calculations of possible tax effects, the actual effective rate could be lower depending on the other items of income and loss that the taxpayer has on that year's 1040. It could even be zero if there are enough losses and deductions of other kinds to offset the recapture income.

This is why it is so important to work with your own professional tax advisor to crunch your real life numbers before undertaking a transaction that could have expensive tax ramifications.

Good luck. I hope this helps.

Kerry Kerstetter

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 11/25/2004 02:17:00 PM Send this post: