Good afternoon,
My wife and myself purchased a primary residence in 2015, we relocated and began renting out the property since January of 2017. Currently I have a tenant vacating and was looking into selling the property. Within that time of converting our primary to a rental we purchased a second rental in 2022 as well.
I have filed my own taxes and knew that my second rental auto populated the depreciation every tax filing and even with my first property entering in the data it would show 0 depreciation. I never thought much of this as most of the years the maintenance and rental income would not show a large profit.
The purchase of this property was around $126,500 and if I were to sell it would be around $265k. With not realizing the depreciation was not offsetting and being factored in for taxes how worried should I be? I just began looking into the depreciation recapture and have seen that up to 25% of the possible depreciation that I did not file would be recaptured at sale.
My question to this also is if I was not deducting or calculating the depreciation on my own for this one property yearly what could the amount be that could be recaptured? Our other property is around the same value and has loosely $10k depreciated a year from the records I have.
I almost want to keep renting it so I can sort this out and get the depreciation sorted out.
-If I didn't deduct, essentially paid more in taxes yearly due to missing this deduction and not reducing my taxable income would that not be as big of an issue from this time period? Get more tax back yearly from returns and then pay more at the end?
I feel like I screwed myself for a simple mistake that I saw during tax season every year but just thought with all my info entered that Turbo didn't question the "0" in depreciation.
Last question is refinancing doesn't stop the depreciation to a certain level or change the amount yearly you can deduct?
Any solutions or ideas if I do sell this house prior to the end of the year?
