A rental property is sold in 2024. How to file it at Turbo Tax desktop. Will the software calculate depreciation recapture automatically?

[csdl2024]

I have questions related to rental sale.

Assume a rental property is sold in 2024. How to file it at TurboTax desktop version?

Does it involve the below steps?

1.)  Under business section, go to Sch E section, enter property sold date to let the software calculate partial depreciation amount?

2.)  Under personal income section, go to 1099B under investment income,  enter aquisition price, cost basis of property, and sales expense, obtain capital gain amount ?

Here are my questions:

1.) Where to find out cost basis of the property and accumlated depreciation amount?

2.) How to enter these two data at TurboTax desktop?

3.) Does TurboTax calculate depreciation recaputure itself?

if "YES",  where to review it.

If "NO", where to enter it? 

[Mike9241]

in the desktop versions  (actually all versions that handle schedule e) the assets are under the property's rental section. when you indicate the property is sold the sales info will be entered in the same section of Turbotax  - not the 1099-B section.

you will enter the sales price for each asset and the related sales expenses (closing costs)   

1.) Where to find out cost basis of the property and accumulated depreciation account?

once you enter the sales info 

in forms mode you go to the schedule E for the property.  

there is an asset wks for each asset

below them should be a depreciation report or for each asset you can use quick zoom for asset life history to see the accumulated depreciation

also once entering sale is completed form 4797 will show total depreciation for each asset 

do not duplicate by using schedule B

the sale must be done through schedule E to have the depreciation calculate properly and remove the property when you roll to 2025

2.) How to enter these two data at TurboTax desktop?

3.) Does TurboTax calculate depreciation recaputure itself?

yes

if "YES",  where to review it.

If "NO", where to enter it? 

[csdl2024]

Thank you so much for your input. It helps alot!

One more question: 

If the rental property missed accumulated depreciation since very beginning. Under such situation, when sell the property, just change prior year accumulated depreciation from default amount  to 0, by doing so, whether it can avoid depreciation recapture calculation? 

Thank you in advance!

[tagteam]

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@csdl2024 wrote:

If the rental property missed accumulated depreciation since very beginning. Under such situation, when sell the property, just change prior year accumulated depreciation from default amount  to 0, by doing so, whether it can avoid depreciation recapture calculation? 

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No. You cannot avoid recapture even if you never took depreciation deductions since the very beginning. 

The accumulated recapture amount is the total of what you actually took or what you should have taken (over the years).

In order to rectify that scenario, you would need to file Form 3115 and make a 481(a) adjustment.

See https://www.irs.gov/instructions/i3115#en_US_202212_publink100035791

You might want to see guidance from a tax professional at this point.

[csdl2024]

Thank you for your input. 

No matter whether the rental property uses depreciation in the past or not, at the year when it is sold, capital gain = selling price -original cost basis of the property. Deprecation is not included with this formula.

The purpose of the recapture is to recover the adjusted cost basis due to man-made depreciation back to its original cost basis amount. 

So there is no such a thing that recapture situation increases or decreases your original cost basis thus negatively increase your capital gain amount. 

Please correct me if I am wrong. 

[tagteam]

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@csdl2024 wrote:
Deprecation is not included with this formula.

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It lowers your adjusted basis and is taxed separately at anywhere from 0-25%.