When you sell a rental, there is usually two types of income
Depreciation Recapture
Capital Gains
Your original cost is lowered by the depreciation on the building, this is your adjusted basis.
The amount of depreciation you need to "pay back" is Ordinary Income.
If you sold more than you paid, this is Capital Gains.
Any improvements made should have been added as an asset the year they were added to the rental.
When you make improvements or add assets, such as appliances, they are each listed separately with their own depreciation schedule.
When you sell, you must allocate part of the sale proceeds to
The Land (that is NOT ever depreciated, so any increase is Capital Gains)
The assets, such as the roof. Usually allocating the remaining value of that asset is easiest since there is then no depreciation recapture.
Whatever sale proceeds you have left goes against the building.
Depreciation is not an option. Whether you properly claimed the depreciation or not, it must be "recaptured"
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