@Freefall1115 wrote:
based off of your example with 110k in capital gains between 4.5-6k of tax recoupment missed out would be nominally expected?
Thank you,
with the added taxes paid for the years missed with the tax return based off of this it doesn’t seem like an exponential number.
I don't understand your comment or question. Could you rephrase?
Rental property is depreciated over 27.5 years. If you sell the property now, we are talking about 8 years of depreciation. So roughly 29% of the original cost basis minus land. For example, if the cost was $100,000 and the land was worth $10,000, then you should have depreciated starting at $90,000 and you would have taken $26,000 of depreciation deductions. That would have saved you (over those 8 years) somewhere around $4000-$6000 of federal income tax, plus some amount of state income tax. If you file form 3115, you would get some of that refunded to you now, although I don't know how much. That would offset some of the tax you must pay on the sale. Whether the tax savings from filing form 3115 would offset the cost of the professional help is something you will have to evaluate.
Even if you don't correct your past depreciation, you will have to put some effort into calculating what the depreciation would have been at the time, so you can determine your correct adjusted basis and the correct allocation of your gain between long term capital gains and recapture.
