Thanks in advance!! As the rental property going on for years, there are quite amount of depreciation taken. Is there any way to avoid tax on deprecaition recapture? I heard about 1031 exchange on rental property, will that totally write-off the recapture or just postpone the tax to next sale? In another question, what is going to happen when you sell the replacement property?

Temecula - the only ways to avoid the recapture on the depreciation is death & sell at a loss (below the remaining basis).   Since neither of these are appealing - a 1031 exchange allows the depreciation previously taken to be transfered to the new asset.   Upon sale of the replacement asset (assuming that another 1031 exchange is not completed) the taxes on the deferred gain & the depreciation would be due on the tax return for the year of sale. 

That's why we often encourage landlords to continue to swap - upon death the heirs will inherit the property at the then current fair market value and the depreciation will start anew. 

The 1031 exchange only defers the capital gain and depreciation recapture taxes; it will not avoid them. 

However, you can swap til you drop, and then your heirs inherit the property and receive a step up in cost basis equal to the fair market value at the date of your death.  This effectively does avoid the depreciation recapture and capital gain taxes.  You still might have estate taxes (inheritance taxes) to worry about, but at least your depreciation recapture and capital gain taxes go away. 

You would recognize and report all accummulated capital gain and depreciation recapture taxes should you decide to sell and "cash out." 

Does that answer your questions?