Sale of primary home partially rented

[mikenandria]

We just sold our main home, which we also rented out, but only a portion of our home and only for a portion of the time.  We lived there approx. 20 years.  I understand that we would pay no capital gains tax if our gain was <$500,000 (married filing joint), but that we have to recapture any (rental) depreciation we claimed on the house.  Is that correct?  Do we have to recapture any other depreciation (HVAC, appliances)?

[Vanessa A]

You are correct, you must recapture any rental depreciation that you were able to claim on the house even if you chose not to take the depreciation.

As for appliances and HVAC system, yes, you need to recapture the depreciation on those assets as well.  You can then choose to allocate a portion of the sales price of the home to these assets.

[Carl]

Understand also, that you will be taxed on recaptured depreciation no matter what. The recaptured depreciation is not included in the "2 of last 5" capital gains tax exclusion. Additionally, the recaptured depreciation is not taxed at the capital gains tax rate anyway. It's taxed as ordinary income anywhere from 0% up to a maximum of 25%, depending on your AGI.

[mikenandria]

Vanessa, thanks for your answer.  Can you please elaborate on allocating a portion of the sales price of the home to these assets?  How would that work?

[mikenandria]

Carl, thanks for your help.  I understand what you are saying.