Vacation home sale depreciation

[gerryg]

I sold a vacation home that I used and that I also rented from time to time. I took depreciation on it for the entire time I owned it. TurboTax is deducting 100% of accumulated deductions from the original purchase price. Specifically, purchase price of 80,000 minus 55,000 depreciation. That gives me an adjusted cost basis of $25,000. The sale price was $100,000. According to TurboTax, gives me a gain of $75,000. Is that correct?

[Carl]

That is correct. All accumulated carry over deductions are deductible in the year you sell the property. But that's not what you're seeing. What you're seeing is depreciation recapture.

All depreciation taken on the property is recaptured and taxed in the year you sell the property. Recaptured depreciation is taxed as a minimum of 15% and a maximum of 25%. So it's the depreciation recapture that lowers your cost basis as required by law.

[gerryg]

Thank you, Carl, for a very speedy reply!

[halpalms]

you have $55k in depreciation recapture and $20k in capital gains.....taxes depend on your tax bracket.....capital gains get taxed at 0%, 15%, and 20% and recapture gets taxed at anywhere from 0% to a max of 25%.