Solved: Can someone check my depreciation math?
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Level 2

Can someone check my depreciation math?

A little rusty but.....Purchased a house in 2008.  Moved out in 2012 but wanted to keep the house so I converted to rental property.  Sold house in 2020

 

My annual depreciation for purchase price is $175,000/27.5 = $6,363

Adjusted cost basis is $175,000 - ($6,363x8) = $124,096

Realized gain is $175,000 - $124,096 = $50,904

Unrecaptured gain is $6,363 x 8 = $50,904

Capital gain is $50,904 - ($6,363x8) = $0

 

My question:  Is it the unrecaptured gain that is being taxed?

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Accepted Solutions
Employee Tax Expert

Can someone check my depreciation math?

No, you have to make a profit to have the capital gain. You always pay tax on the recaptured depreciation.

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4 Replies
Employee Tax Expert

Can someone check my depreciation math?

Not quite. I didn't do the actual math but your capital gain is the sales price minus the purchase price exclusive of the depreciation. The depreciation is the unrecaptured gain is taxed as ordinary income. Page 2 of Form 4797 shows this calculation.

 

20 Gross sales price                                                        ??????

21 Cost or other basis plus expense of sale                    175000

22 Depreciation (or depletion) allowed or allowable        124906

23 Adjusted basis. Subtract line 22 from line 21                50094

24 Total gain. Subtract line 23 from line 20 .                       

 

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Level 2

Can someone check my depreciation math?

I'm sorry, I neglected to say that I never made a profit off of the sale.  I purchased for $175,000 and sold for $175,000.  Do you have to make a profit to be taxed on depreciation recapture?  I had found an example that said you didn't if you sold at a loss, but was wondering about neither profit nor loss.  Kind of a wash situation.

Employee Tax Expert

Can someone check my depreciation math?

No, you have to make a profit to have the capital gain. You always pay tax on the recaptured depreciation.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

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Level 10

Can someone check my depreciation math?

I think the other response is misleading.

I haven't gone through to verify the depreciation figure you provided is accurate.

Based on your facts, you DO have a gain.

Since this is real property, the gain is subject to Section 1250 recapture.

So to answer your question, YES, all your gain is subject to the 1250 recapture based on your facts.

You should see this being calculated on the Schedule D worksheets.

 

*A reminder that posts in a forum such as this do not constitute tax advice.*
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