Sell of Rental Property is Triggering AMT

[lvans00]

In 2005 I purchased a property that I have been renting out.  Purchase price was $255,000.  I sold the property in 2023 for $325,000.  I depreciated the home (value of $174,000) and not the land over the years.  Total depreciation was about $114,000.  Because of my income during the time I've owned the property, I haven't been able to take annual losses and have over $200,000 in suspended passive losses.  I've run into a couple of issues: 1) the program isn't using the total cost basis of the rental property - it's using the depreciation basis ($174,000).  If I change the depreciation basis, it calculates the current year depreciation incorrectly.  2) the program isn't applying the prior year suspended passive losses.  Both issues are causing a huge gain and triggering Alternative Minimum tax.  Current calculated gain is: $265,000 ->$325,000 - $60,000 (adjusted basis $174,000 minus $114,000 depreciation).  How do I enter the information correctly into the program where it applies the carryover losses and uses the total cost basis of the property?

[KrisD15]

Depreciation Recapture is figured first and that is reported as ordinary income. 

If you took 114,000 depreciation and got it all back, you have 114,000 Ordinary Income. 

Now the remaining 70,000 gain is Capital Gain. 

(there may also be selling expenses) 

Be sure to enter the income and expenses for 2023 before you report the sale. 

Any carryover (up to 70,000) can be applied against that Capital gain. 

If the program does not apply the Capital Loss Carryover, find that under

Wages & Income

Investment Income

Capital Loss Carryover

[lvans00]

@KrisD15 thank you for the post.  Turbotax automatically recaptured the depreciation by reducing the cost basis of my rental property.  I also see where the capital gains are being offset by the prior years unallowable loss.  My issue is that I'm being hit with alternative minimum tax.  Looking at the Alternative Minimum Tax form 6251 line 2m (passive activities) is showing a positive number (ie, a gain).  I've had prior year losses....therefore, I assume that number should be negative (ie, a loss).  Is this a bug?

[RobertB4444]

No.  For alternative minimum tax purposes your passive loss is added back in to income.  So it is showing on the 6251 as a positive number.

@lvans00