Depreciation on a Refinance

[Peter G.]

Hello,

When you refinance a property is depreciation recaptured?   Or is depreciation only recaptured on the sale of the property?

[Paul Caputo]

Depreciation has nothing to do with financing. You can pay cash or use 100% financing and the depreciation would be the same. As such there is no effect on the depreciation when you refinance. Recapture only occurs when you sell the property. If you do a 1031 exchange you'd defer recapture until selling the property without doing an exchange.