capture prior years (2016 to 2020) depreciation of rental properties

Forum|Forum|4 years ago
January 26, 2022
2 replies
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How can one capture prior years (for example from 2016 to 2020) depreciation of rental properties in 2021 tax year?

ColeenD3

Level 15

You would only recapture the depreciation if you sold the property. If you did sell, the program will walk you through the procedure in the Rental section. By answering the questions, the program will automatically calculate the depreciation to be recaptured and enter it on Form 4797.

skyper480Author

Level 2

If the rental properties are used for rental income and do NOT plan to sell them in the near future and no depreciation was taken in the prior years, are there situations whereby NOT taking depreciation is beneficial?

ColeenD3

Level 15

You can't decide you don't want to take depreciation. IRS has deemed it "allowed or allowable" meaning that you have to recapture it whether you take it or not. If you have converted it to personal property, you will still have to recapture the depreciation at the time of sale.

If you never took the depreciation, you can take advantage of Form 3115 - Application for Change in Accounting Method. This option would allow you to claim depreciation for all the years you have missed. Filing form 3115 is a delicate process and I would advise hiring a local tax professional to do it for you.

Mike9241

Level 15

not clear what you mean. if you didn't take depreciation for the years it was a rental see a tax pro because you just can't dump all the missed depreciation into the current year without filing specific tax forms.

Mike9241