# Depreciation recapture when you sell servers

When depreciated servers sell for more than their remaining basis, the gain is ordinary income up to the depreciation taken, bonus and section 179 included. General information, not tax advice. Talk to your tax advisor about your situation.

## The section 1245 rule

Ordinary income is the smaller of two numbers. The depreciation allowed or allowable on the property, and the gain (sale price minus adjusted basis). Gain above that is section 1231 gain. Servers and GPUs are section 1245 property, and the sale goes on Form 4797, Part III ([Publication 544](https://www.irs.gov/pub/irs-pdf/p544.pdf), chapter 3).

Every first-year deduction counts. Regular MACRS, bonus depreciation and section 179 are all recaptured. “Allowable” means depreciation you were entitled to but did not claim still lowers the basis.

## A worked example

$400,000 of servers placed in service in 2026 under the half-year convention, sold in 2029 for $120,000. The sale year gets half its table amount.

|  | MACRS only | 100% bonus |
| --- | --- | --- |
| Cost | $400,000 | $400,000 |
| Depreciation through 2029 | $307,840 | $400,000 |
| Adjusted basis at sale | $92,160 | $0 |
| Sale price | $120,000 | $120,000 |
| Gain | $27,840 | $120,000 |
| Ordinary income (1245) | $27,840 | $120,000 |
| Section 1231 gain | $0 | $0 |

The depreciation taken exceeds the gain in both cases, so all of it is ordinary income. With 100% bonus the basis is zero and the whole price is gain. Depreciation by year for your servers is in the [MACRS calculator](https://managedgpus.com/macrs-depreciation-calculator); used server prices are in our [GPU resale index](https://www.amcompute.com/gpu-resale-index).

## Special cases

| Situation | Rule |
| --- | --- |
| Sale-leaseback | Section 1245 applies to the sale |
| Installment sale | Recapture income is reported in the year of sale, before the installment method |
| Trade-in for new GPUs | Like-kind exchanges after 2017 generally cover only real property, so it is a sale |
| Business use falls to 50% or less | Section 179 can be recaptured without a sale |
| Sale below adjusted basis | No recapture; a loss, often a section 1231 loss for business property held over a year |

[Publication 544](https://www.irs.gov/pub/irs-pdf/p544.pdf), chapter 3; [Publication 946](https://www.irs.gov/publications/p946), chapter 2. Your used servers can qualify for bonus in a buyer's hands ([bonus depreciation in 2026](https://managedgpus.com/guides/accelerated-depreciation/bonus-depreciation-2026)); the other rules are in the [accelerated depreciation guides](https://managedgpus.com/guides/accelerated-depreciation).

## Planning to buy GPU servers?

- A call with our CTO about what you need
- Ballpark costs and timelines for your budget
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Source: https://managedgpus.com/guides/accelerated-depreciation/depreciation-recapture