We sold our house in 2021. We used it as a rental for part of the year but are able to claim it as our primary residence for at least 2 of the last 5 years (also required to move due to military reassignment, so we get the extra 10 years for exclusion purpose). When I did my 2018-2020 tax returns, I followed the prompts in TurboTax Premier to apply the depreciation for the rental property.
However, now that we sold the home, I am working through the capital gains process. I'm now learning that even if I meet the exclusion rules for selling the home as a primary residence, I will have to pay capital gains tax on depreciation I claimed over the time it was a rental property. The depreciation in 2021 does not impact my income values as significantly when compared to the amount it adds to my capital gains (i.e., I would pay a much larger tax on 2021 depreciation as a capital gain than I would if I didn't claim it in as a rental expense and paid the extra income tax). Yet when I work through the asset information on the home as a rental property, TurboTax Premier forces me to to take the depreciation, because if I don't it removes the home sale and eliminates all previous depreciation from the calculations. How do I refuse claiming depreciation in 2021 on this property, but still work up the home sale worksheet and include 2018-2020's depreciation to calculate my capital gains?
