I have heard conflicting information on Depreciation Recapture. Is the tax rate on recapture fixed at 25% or is it the maximum? I have also heard that the recapture is taxed as ordinary income and if your effective rate is below the 25%, it would be taxed at the lower rate. Would you please clarify for me? Thanks.
It is fixed at 25% regardless of your tax bracket.
At another real estate web site, there is a CPA posting that the depreciation recapture rate is the same as your tax bracket rate or 25% whichever is lower. In my opinion, his position is not supported by the tax code.
If you want to look at the Internal Revenue Code for yourself and make your own determination, look at Section 1(h)(1)(D)