How/when is depreciation recaptured reported on a rental property sold in 2017; paid in full by "Instalment" in 2018?.

Turbo tax allows me to input full installment amount received in 2018 under sale of business property; but does indicate where to input depreciation recapture.  Is this automatically transferred and calculated from past turbo tax fillings?

HelenaC
New Member

Investors & landlords

You may want to review your 2017 income tax return and installment sale. 

The 100% depreciation recaptures occurs at the time of sale, so in your case, it should have been reported on your 2017 income tax return and yes, if entered correctly, TurboTax uses the inception to date depreciation to calculate the gain/loss and tax.

  • Any depreciation claimed on the property must be recaptured and reported in the sale year, which will be taxed at the rate that applies, depending on the type of property. 
  • The recaptured depreciation is then added to the basis of the property to calculate the capital gain, which will be taxed at the capital gain rate.

Each installment sale consists of: return of adjusted basis, interest income, and capital gain on the sale. 

  • When reporting an installment payment, both interest and the gain on the sale must be reported. 
  • There is no interest on the down payment, but each later installment payment must consist of at least some interest.
  •  An installment sales contract that does not stipulate a minimum interest rate may have to calculate unstated interest.