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How do I calculate the tax on a rental unit after 10 years of depreciation? what are the inputs to this calculations/

3 Replies
Level 15

How do I calculate the tax on a rental unit after 10 years of depreciation? what are the inputs to this calculations/


You are asking from TT Live, for which you pay extra. Please contact a rep.
Live help is available M-F during normal business hours after tax season.



If this is for estimating the tax liability for the 2022 tax return  AND  you have been depreciating the property correctly all these years then here is a basic blueprint to follow : 



Cost basis =  purchase price + cost to buy + improvements

Adjusted cost basis =  cost basis -  depreciation taken

Sales price - ( cost basis + cost to sell )  =  profit or loss

Profit - depreciation taken = cap gain 

Depreciation is taxed as ordinary income not to exceed 25%.

Cap gain taxed at no more than 20%.


Ok ... a simple example of ratios ...  if you have more assets than the example then you will have more lines.  Remember if you divide a big number into a littler number you get a % ...  thus 5000/100,000 = 5%


       original  cost basis          ratios                  Sales price             cost of sale 

home    80000                   80%                          160,000               8,000

land       15000                   15%                           30,000                 1,500

roof        5000                        5%                           10,000                   500 

totals     100,000                100%                        200,000               10,000


All you need to enter into the program is the % of sales price & % of cost of sale for each asset being sold and you will have to do the math yourself as the program will not do it for you if you have more than one asset (the land & building are considered 2 assets) . 


And if you have NOT been taking depreciation as required  then RUN to a local tax pro when you file this return to get this error fixed correctly so you do not pay more taxes than you are required to do ... the form 3115 you need is not supported in the TT program and it is NOT a DIY project. 




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Level 15

How do I calculate the tax on a rental unit after 10 years of depreciation? what are the inputs to this calculations/

For an estimate, try this tool Enter your regular income first to see the regular tax. Then add the sale to see the effect.
Enter the difference between the sale price and what you paid for it originally  as a long term capital gain (LTCG). Enter the depreciation you've taken over the years (depreciation "recapture") as other income. Depending on how much total income you have LTCG are partially taxed at 0%, 15%, 20% and/or 23.8%. Depreciation recapture is taxed at your marginal rate, but not more than 25% (the Taxcaster tool is not capable of applying the 25% cap).

Level 15

How do I calculate the tax on a rental unit after 10 years of depreciation? what are the inputs to this calculations/

Assuming you sold the property in 2021 *AND* assuming the property was still classified as residential rental real estate when you sold it, the below guidance is how you enter this in TurboTax. Note that the program (not you) will do the math. Then you can check the appropriate forms to confirm things are correct. (Basically, the SCH D and the 4797)

Reporting the Sale of Rental Property

If you qualify for the "lived in 2 of last 5 years" capital gains exclusion, then when prompted you WILL indicate that this sale DOES INCLUDE the sale of your main home. For AD MIL personnel who don't qualify because of PCS orders, select this option anyway, because you "MIGHT" qualify for at last a partial exclusion.

Start working through Rental & Royalty Income (SCH E) "AS IF" you did not sell the property. One of the screens near the start will have a selection on it for "I sold or otherwise disposed of this property in  2021". Select it. After you select the "I sold or otherwise disposed of this property in 2021" you continue working it through "as if" you still own it. When you come to the summary screen you will enter all of your rental income and expenses, even if it's zero. Then you MUST work through the "Sale of Property/Depreciation" section. You must work through each individual asset one at a time to report its disposition (in your case, all your rental assets were sold).

Understand that if more than the property itself is listed in your assets list, then you need to allocate your sales price across all of your assets.  You will only allocate the structure sales price; you will NOT allocate the land sales price, since the land is not a depreciable asset.  Then if you sold this rental at a gain, you must show a gain on all assets, even if that gain is $1 on some assets. Likewise, if you sold at a loss then you must show a loss on all assets, even if that loss is $1 on some assets.

Basically, when working through an asset you select the option for "I stopped using this asset in 2021" and go from there. Note that you MUST do this for EACH AND EVERY asset listed.

When you finish working through everything listed in the assets section, if you ever at any time you owned this rental you claimed vehicle expenses, then you must also work through the vehicle section and show the disposition of the vehicle. Most likely, your vehicle disposition will be "removed for personal use", as I seriously doubt you sold your vehicle as a part of this rental sale.

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