Recapture refers to the government’s recovery of a taxpayer’s gain from beneficial treatment—such as depreciation tax credits, deductions, or other tax credits—since the beneficial treatment no longer applies. For example, 26 U.S.C. § 50 lays out scenarios where the Department of Treasury may recapture a taxpayer’s gain from beneficial tax treatment from dispositions of property. § 50(a)(1), to illustrate, provides that the government can recapture a portion tax credits from an investment credit property if the taxpayer disposed of the property before the end of the tax year. The recaptured amount depends on when in the year the taxpayer disposed of the property.
[Last updated in December of 2020 by the Wex Definitions Team]