@Nikkinoodle1991 wrote:
I recognize that we shouldn't have been depreciating the home 100% but we did. My question is does that affect capital gains?
Any depreciation reduces your cost basis, which means it increases your gains when the gain is calculated (selling price minus basis).
Then, the portion of the gain that is attributed to depreciation is taxed using the recapture rules -- ordinary income tax rates, with a cap of 25%. The remainder of the gain is taxed according to the normal rules for capital gains, which includes lower rates for long term capital gains (15% or 20%) as well as the exclusion for one's main home, if you qualify.
