Depreciation & Recapture

slinkblot · ‎April 01, 2025

I have a couple questions:

1) The income from my rental property is close to the cost for repairs, maintenance, taxes, insurance, etc., which leaves me little to sometimes negative profit. I've also made some improvements. Do I have to claim those improvements and depreciate it? I'm reluctant as I don't want to add that to the recapture costs.

2) If I didn't claim the property depreciation on my rental over time and then sell it, how does the IRS determine what my cost basis is for recapture?

KrisD15

1. You can "not" claim improvements and/or depreciation, however if audited, the IRS would require you recapture depreciation whether it was taken or not.

The term is "Depreciation taken or could have been taken". The IRS wants depreciation claimed and, if applicable, recaptured.

2. The IRS will use any method they will argue as fair, possible by using assessment values on tax bills or a market analysis.

Pub 527

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