Form 4797 Business Property Sale Calculator 2026 — §1245 & §1250 Recapture
Calculate Section 1245 and 1250 depreciation recapture, Section 1231 gains, and total tax on business property sales. Covers equipment and real estate.
$
$
Cumulative depreciation deducted over all years $
%
$0
Total Federal Tax on Sale
$0
Ordinary Income (Recapture)
$0
§1231 Gain (LTCG Rate)
$0
Net After-Tax Proceeds
Form 4797 Calculation Breakdown
How the Form 4797 Calculator Works
Select your property type (personal property like equipment uses §1245 rules; real property like buildings uses §1250 rules). Enter the original cost, accumulated depreciation, and sale price. The calculator determines how much gain is ordinary income (depreciation recapture) vs long-term capital gain.
§1245 vs §1250 Rules
Adjusted Basis = Original Cost − Depreciation Taken
Total Gain = Sale Price − Adjusted Basis
§1245 (Equipment): Ordinary Income = min(Total Gain, All Depreciation Taken)
§1245 §1231 Gain = max(0, Total Gain − Ordinary Income)
§1250 (Buildings): Ordinary Recapture = Depreciation in excess of straight-line
Unrecaptured §1250 Gain (25% rate) = min(Total Gain − Ordinary, Straight-line Depreciation)
§1231 Gain (LTCG rate) = Total Gain − Ordinary − Unrecaptured §1250
Total Gain = Sale Price − Adjusted Basis
§1245 (Equipment): Ordinary Income = min(Total Gain, All Depreciation Taken)
§1245 §1231 Gain = max(0, Total Gain − Ordinary Income)
§1250 (Buildings): Ordinary Recapture = Depreciation in excess of straight-line
Unrecaptured §1250 Gain (25% rate) = min(Total Gain − Ordinary, Straight-line Depreciation)
§1231 Gain (LTCG rate) = Total Gain − Ordinary − Unrecaptured §1250
Example
Equipment (§1245): Cost $500K, depreciation taken $200K, sale price $450K, 32% ordinary rate, 15% LTCG:
Adjusted basis = $500,000 − $200,000 = $300,000
Total gain = $450,000 − $300,000 = $150,000
Ordinary income (recapture) = min($150,000, $200,000) = $150,000
§1231 gain = $0 (all gain is recapture)
Tax on ordinary income: $150,000 × 32% = $48,000
Adjusted basis = $500,000 − $200,000 = $300,000
Total gain = $450,000 − $300,000 = $150,000
Ordinary income (recapture) = min($150,000, $200,000) = $150,000
§1231 gain = $0 (all gain is recapture)
Tax on ordinary income: $150,000 × 32% = $48,000
Extended
Sell Now vs Sell Next Year + Installment Analysis
Compare tax impact of selling now vs after year-end, and model installment sale tax deferral
Compare the tax impact of selling now vs waiting until next year, and model how an installment sale spreads the tax burden over multiple years.
%
May be lower if you expect income to drop Spreads gain recognition over multiple years
Sell Now vs Next Year vs Installment Comparison
| Scenario | Total Gain | Ordinary Income | §1231 / LTCG | Total Tax | Net Proceeds |
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Frequently Asked Questions
What is Form 4797 and when do I need it?
Form 4797 is used to report gains and losses from the sale of business property, including equipment, vehicles, buildings, and land. You need it whenever you sell property used in your trade or business, even if at a loss. The form separates gains into ordinary income (depreciation recapture) and Section 1231 capital gain portions, which are taxed at different rates.
What is Section 1245 depreciation recapture?
Section 1245 applies to depreciable personal property such as equipment, machinery, and vehicles. All depreciation taken on Section 1245 property is recaptured as ordinary income when the property is sold at a gain — up to the total gain. Any remaining gain above the recaptured amount is treated as Section 1231 gain, which qualifies for long-term capital gains rates if held more than one year.
How does Section 1250 recapture work for buildings?
Section 1250 applies to depreciable real property such as commercial buildings. Only depreciation taken in excess of straight-line depreciation is recaptured as ordinary income under Section 1250. In practice, most commercial real property uses straight-line depreciation, so there is often little or no Section 1250 ordinary income recapture. However, the remaining gain (up to total depreciation taken) is subject to the 25% unrecaptured Section 1250 gain rate, with any excess qualifying for 0%, 15%, or 20% long-term capital gains rates.
What is a Section 1231 gain?
Section 1231 gains arise when you sell business property held for more than one year at a profit that exceeds any depreciation recapture. Section 1231 gains are taxed at favorable long-term capital gains rates (0%, 15%, or 20% depending on your income). If your net Section 1231 gains for the year are negative (a net Section 1231 loss), the loss is treated as an ordinary loss, which is fully deductible against ordinary income.
What is the 25% unrecaptured Section 1250 gain rate?
The 25% rate applies to the portion of long-term capital gain on real property sales that represents previously taken straight-line depreciation. Even though you used straight-line depreciation (no excess over straight-line), the IRS taxes this "recapture" at 25% — a rate between ordinary income rates and the standard 0%/15%/20% long-term capital gains rates. This only applies to real property (buildings), not personal property (equipment).