What is Bonus depreciation recapture?
Bonus depreciation recapture occurs when a taxpayer sells or disposes of property for which bonus depreciation was previously claimed, requiring recognition of ordinary income to the extent of prior depreciation deductions. Under Section 1245 rules, gain on disposition is treated as ordinary income rather than capital gain up to the amount of accumulated depreciation, including any bonus depreciation claimed. This recapture provision prevents taxpayers from converting ordinary deductions into capital gains upon sale. Strategic planning around Depreciation and amortization helps businesses understand the recapture implications of recapture before claiming accelerated deductions on qualifying assets.
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