re: Tax question on a home sale - ordinary income vs capital gains

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When you claim property depreciation on your tax return for your current investment property, it reduces your annual income that would be subject to taxes. Then, when you sell the property, the IRS wants that money back. Therefore, when the sale price of a property exceeds the tax basis or adjusted cost basis, the difference is “recaptured” by reporting it as income that’s then taxed using ordinary income tax rates.

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