Section 1250 property is an Internal Revenue Service code stating that any gain from selling a depreciable property is ordinary income, rather than a capital gain. The amount of taxes homeowners pay as ordinary income depends on the type of property, such as section 8 housing or rehabilitated properties.
The IRS often uses section 1250 of the tax code to make up for tax revenues lost on depreciating assets. Capital gains taxes are lower than ordinary income; therefore, the IRS uses section 1250 to recapture taxes due to depreciation. Any asset sold at a higher price than the depreciated value is a method the IRS uses to assess section 1250 properties.