The recapture math runs in a fixed order: find total depreciation claimed, compute adjusted basis, compute total gain, then split the gain into its rate layers. Here is a complete example with real numbers.
The setup
You buy a residential rental for $1,000,000 in 2025, with $150,000 allocated to land, leaving a depreciable basis of $850,000. A cost segregation study reclassifies $170,000 into 5-year personal property. Because the property was acquired after January 19, 2025, OBBBA's permanent 100 percent bonus depreciation under IRC section 168(k) lets you deduct the full $170,000 in year 1. The remaining $680,000 depreciates straight line over 27.5 years, about $24,727 per year.
After 5 full years you sell for $1,250,000. Ignoring the mid-month convention to keep the numbers round:
Depreciation claimed: $170,000 bonus plus $123,636 straight line equals $293,636. Adjusted basis: $1,000,000 minus $293,636 equals $706,364. Total gain: $1,250,000 minus $706,364 equals $543,636.
Splitting the gain into rate layers
Layer 1 is section 1245 ordinary income. The sale contract allocates $40,000 to the worn 5-year components, whose adjusted basis is zero after the bonus deduction. IRC section 1245 recaptures the lesser of the depreciation claimed ($170,000) or the gain on those assets ($40,000), so $40,000 is ordinary income. At a 37 percent bracket, that is $14,800 of tax.
Layer 2 is unrecaptured section 1250 gain. The $123,636 of straight-line depreciation on the building comes back at a maximum 25 percent rate under IRC section 1(h)(6), which is up to $30,909 of tax.
Layer 3 is long-term capital gain. The remaining $380,000 of gain ($543,636 minus $40,000 minus $123,636) is taxed at 15 or 20 percent. At 20 percent, that is $76,000.
Total federal tax: roughly $121,709 before the 3.8 percent net investment income tax and any state tax. All of it reports on Form 4797 and Schedule D.
What the example shows
The allocation step matters as much as the depreciation history. Only $40,000 of the $170,000 bonus deduction came back as ordinary income, because that is all the buyer paid for used short-life components, and IRC section 1245 recapture is limited to the actual gain on each asset. The building's section 1250 layer produced no ordinary income at all, since straight-line MACRS leaves no excess over straight line. The net result: $293,636 of deductions taken years early, with the bulk of the payback taxed at 25 percent or less at sale.
Amadae's cost segregation screen runs this same layered math on your actual purchase price and expected hold, and the depreciation schedules carry through to the return Amadae prepares, so Form 4797 reflects the right split when you sell. It is a screening model, not an engineering study, but it makes the exit math visible before you start.