@smitchells wrote:
In 2015 we rented the house for a few years while we travelled, and took depreciation deductions. The renters moved out 8/1/18 and we moved back in 8/1/18. We lived in the house until the end of November 2020 when we sold the house.
Why does TurboTax add that same depreciation into our ordinary income. Taxing it twice in a way. Turbo Tax is reporting the depreciation amount on Schedule D along with our other Capital Gains, but then that amount is pulled out during the tax calculation and taxed as regular income.
How much is your total gain? The fact it was rented out and then you moved back into it means your gain is prorated because you have "Nonqualified Use". If your total gain is less than $500,000, it would NOT all be able to be excluded and you will owe some tax (in addition to the depreciation).
It is not being taxed twice (unless you entered something incorrectly). As you said, it is being pulled OUT of your capital gains and taxed at your regular tax rate (up to 25%). So if your tax return shows $30,000 of capital gains, of which $20,000 are from depreciation, it would tax $10,000 at the capital gain rates and $20,000 at your regular tax rate (up to 25%).
