When selling a rental property with a contract/ballon payment, how do you recapture the depreciation taken over the years. I use TT Home & Biz

[leisurelar]

If I sell this yr and the ballon pt is 3 yrs from now, where/when do I recapture the depreciation?

[AmeliesUncle]

If I remember correctly, when you tell TurboTax that you sold the business there will be a followup question (or maybe a checkbox) asking if you received payments over more than one year (or in later years).  That will allow you to choose to use the Installment Method on Form 6252 if you want to do that.

If you have the proper information about the depreciation in TurboTax, it should handle the depreciation automatically when you report the sale, including using the Installment Method.

*IMPORTANT*:  Although I think the program will handle it automatically, if it does ask you questions about it, the deprecation on your real estate results in "Unrecaptured Section 1250 Gain", most likely *NOT* "recapture".  They are treated VERY differently.  The "Unrecaptured Section 1250 Gain" will be taxed as you receive payments from the Installment Sale.