@pattysamsel63
First, for a residential rental, the depreciation period is 27.5 years rather than general business use which is 39 years, so that affects the calculation a bit.
Second, when you place property in service as a rental, you are supposed to list it on your tax return and begin keeping accurate records. You must account for all the depreciation that you claimed or could have claimed, even if you didn’t claim depreciation in a particular year because you made a mistake. Your tax return or your accountant should create a depreciation schedule, that memorialize the amount of depreciation you claimed each year.
When you take property out of service as a rental, you have to delist the property from your tax return and stop claiming depreciation. Then if you begin renting it again, you have to place the property back in service, potentially with the same or a new adjusted cost basis for depreciation, depending on the circumstances.
Time certainly does make a difference. If you rented a room for 20 years, you will have claimed more depreciation than if you rented the room for two years.
Over the entire length of time the property was rented, the owner or landlord is supposed to be keeping track of the depreciation. If you have a completed depreciation schedule, then that is your answer. If you claimed $2136 of depreciation, that is what you report when you sell the property. You pay recapture tax on that amount, and then any capital gains over that amount may be eligible for the exclusion. We aren’t recapturing 5% of the gain if 5% of the home was rented, we are recapturing the amount of depreciation that was claimed or should have been claimed. The percentage is just one of the factors used to calculate the depreciation amount. Other factors include the length of time the space was rented, the original cost of the home, and the cost of any permanent improvements that might have been made to the home.
If you did not keep track of your depreciation at all, you may want to see an accountant to help you calculate the amount of recapture you will have when you sell the property.
