Bought house in 04 for $177K, lived in it til 14. ...
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Returning Member

Bought house in 04 for $177K, lived in it til 14. Rented from 14 to now, & sell for $150K. Owe capital gains tax? If we dep on SchE for $27K, owe cap gains tax now?

Depreciation on Schedule E has been yearly since 2014, with a total of $27K this year.
4 Replies
Expert Alumni

Bought house in 04 for $177K, lived in it til 14. Rented from 14 to now, & sell for $150K. Owe capital gains tax? If we dep on SchE for $27K, owe cap gains tax now?

Yes, you owe capital gains tax on the gain from the sale of the house that was not depreciated.  

 

For the $27K that was depreciated it is recaptured when you sell the house and is taxed at the same tax rate as the rest of your income.  

 

You report that sale of the rental property in the rental section of TurboTax.

  1. With your return open in TurboTax, search for rentals and then select the Jump to link in the search result.
  2. Answer Yes to the question Did you have any rental or royalty income and expenses in 2019 for property you own?
  3. When you get to Is This a Rental Property or Royalty? select Rental property and fill out the description, address, and owner.
  4. When you hit Do Any of These Situations Apply to This Property? check the Sold box along with any other boxes that may apply.
  5. Continue following the onscreen prompts to enter info about your rental property. Eventually you'll get to the Review Your [Property] Rental Summary screen. You can report the sale in the Sale of Property/Depreciation section, along with any other pertinent info (like income and expenses)

Tip: Take your time and pay close attention. There's a lot of info and it's easy to miss if you're in a hurry.

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Returning Member

Bought house in 04 for $177K, lived in it til 14. Rented from 14 to now, & sell for $150K. Owe capital gains tax? If we dep on SchE for $27K, owe cap gains tax now?

I apologize, but your response has my head turned inside out.

 

"Yes, you owe capital gains tax on the gain from the sale of the house that was not depreciated. "

 

If I bought the house at $177K in 2004, depreciate it by $27K, down to $150K.  I sell the house for $150K.

I would not owe any capital gains, correct?  Given the scenario, I have a gain of $0, correct?

 

"For the $27K that was depreciated it is recaptured when you sell the house and is taxed at the same tax rate as the rest of your income. "

 

How does the recapture work exactly?  Given my scenario, I sell the house for $150K, why would I be taxed on the $27K loss?

 

I'm really confused.

Returning Member

Bought house in 04 for $177K, lived in it til 14. Rented from 14 to now, & sell for $150K. Owe capital gains tax? If we dep on SchE for $27K, owe cap gains tax now?

Oh to clarify one thing.  I haven't yet sold the house, so I won't be doing the "reporting of a sale".  I'm planning on selling the house next year.  I was just filling out my taxes this year and was looking into the tax situation surrounding the future sale of the house.

Employee Tax Expert

Bought house in 04 for $177K, lived in it til 14. Rented from 14 to now, & sell for $150K. Owe capital gains tax? If we dep on SchE for $27K, owe cap gains tax now?

You are correct, if you don't have a gain on the sale then you will not have any taxable income. What @DianeC958 meant was if you did have a gain, then you would have to pay tax at ordinary rates on the portion of gain represented by the depreciation taken on the property, thus the depreciation would be "recaptured."

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