§1250 Property Overview
Section 1250 property is depreciable real property that is not §1245 property — generally buildings and their structural components. Its ordinary-income recapture is limited to additional depreciation above straight line. MACRS buildings usually have none of that excess. Educational information, not tax advice.
Educational information, not tax advice.
Updated 2026-10-14
Key takeaways
- §1250(c) defines §1250 property as real property, other than §1245 property, that is or has been subject to the §167 allowance.
- Buildings and structural components are generally §1250 property.
- §1250 ordinary-income recapture is generally limited to depreciation in excess of straight line.
- MACRS buildings use straight line, so that excess is generally zero.
- Other Code rules can still affect the tax rate on gain; those rates are not stated on this page.
Section 1250(c) defines §1250 property as any real property, other than §1245 property as defined in §1245(a)(3), which is or has been property of a character subject to the allowance for depreciation provided in §167. In a cost segregation study, the building shell, structural components such as walls, roofs, central HVAC, general plumbing and wiring, and real property land improvements are generally §1250 property.
Section 1250 recaptures as ordinary income only “additional depreciation.” For property held more than one year, additional depreciation means depreciation adjustments to the extent they exceed the adjustments that would have resulted under the straight-line method. For property to which §168 applies, that comparison uses the straight-line method and the recovery period applicable to the property.
For “all other §1250 property” disposed of after December 31, 1975, the applicable percentage is 100 percent. Because MACRS requires straight line for residential rental and nonresidential real property, a building depreciated under MACRS generally has no additional depreciation. Ordinary-income recapture under §1250 itself is therefore generally none on those buildings.
Fifteen-year land improvements use 150 percent declining balance, which is faster than straight line. Whether a particular improvement is §1250 or §1245 property, and how recapture applies, depends on the item. That is a point for the taxpayer’s CPA.
This page is educational information, not tax advice. Other Code provisions, outside §1250 itself, can set the tax rate on the portion of gain attributable to straight-line depreciation on real property. Those rate rules were not opened for this page, so they are not stated here.
What the statute recaptures
The operative rule in §1250(a)(1) treats as ordinary income the applicable percentage of the lower of additional depreciation attributable to periods after December 31, 1975, or the excess of amount realized (or fair market value) over adjusted basis. For most property that is not a listed housing program, the applicable percentage is 100 percent.
Additional depreciation is defined in §1250(b). If the property was held one year or less, additional depreciation means all of the depreciation adjustments. After one year, only the excess over straight line counts.
Depreciation adjustments include amounts allowed or allowable after December 31, 1963. If the taxpayer can show that the amount allowed was less than the amount allowable, only the amount allowed is used.
Land improvements
Site work recovered as 15-year property under asset class 00.3 is often §1250 real property, not §1245 personal property. The 150 percent declining-balance method can create additional depreciation on those assets.
Some land improvements can be §1245 property if they meet a listed category, such as property used as an integral part of manufacturing. Classification is item-specific. A parking lot and a process-related fence are not the same analysis.
A study should state the recapture category as well as the recovery period. Listing an item as “15-year” without saying whether it is §1245 or §1250 leaves an exit question unanswered.
What this page does not cover
Other Code provisions, outside §1250 itself, set the tax rate on the portion of gain attributable to straight-line depreciation on real property. We have not verified those rate rules from §1(h) for this page, so they are not stated here.
Section 291(a)(1) reduces capital-gain treatment for corporations on §1250 property. That cross-reference appears in the statute. Corporate dispositions should be reviewed by the taxpayer’s CPA; this page does not compute the adjustment.
Exceptions in §1250(d) cover gifts, transfers at death, certain tax-free transactions, and like-kind exchanges. They parallel the §1245 exceptions in broad outline and are transaction-specific.
Why the split matters
Moving cost from §1250 to §1245 categories changes both the timing of deductions and the character of gain on sale. A complete comparison looks at both.
The building that remains after a study is still §1250 property, recovered over 27.5 or 39 years, straight line, mid-month. The study does not convert walls and roofs into personal property by listing them on a schedule.
AmeriSouth is a caution, discussed on the residential-rental page, that aggressive component lists often remain with the building. That outcome is fact-specific. It is not a rule that residential finishes can never be personal property, and it is not a holding restated here.
This page is educational information, not tax advice. Character of gain, installment sales, and entity-level dispositions should be reviewed by the taxpayer’s CPA before a study or a sale is decided. Super Intelligence is proposed documentation support; it does not compute recapture.