IRC Section 1245 Recapture

Definition

A tax rule requiring that gains on the sale of depreciable personal property (such as equipment and machinery) be taxed as ordinary income to the extent of depreciation previously claimed. Unlike real estate recapture under Section 1250, Section 1245 applies a full ordinary income rate to all depreciation taken, often resulting in a higher immediate tax liability. This rule prevents taxpayers from converting ordinary deductions into lower-taxed capital gains at the time of sale.