topic Should the loss carryover in rental home in California be allowed in the year of rental is sold since the all deprecation claimed has been recaptured? in Get your taxes done using TurboTax

Should the loss carryover in rental home in California be allowed in the year of rental is sold since the all deprecation claimed has been recaptured?

waveheatin — Sun, 27 Aug 2023 18:41:34 GMT

I sold my rental property in 2022. In turbotax, the full amount of depreciation has been re-captured, but the loss carryover due to depreciation in 2021 is not allowed in 2022 in California tax return (but allowed in Federal tax return) when the rental home is sold in 2022. Essentially, California recaptured the $5000 depreciation that is not allowed as an actual loss in 2022, recaptured the $5000 I never actually get to use as a real loss.

Re: Should the loss carryover in rental home in California be allowed in the year of rental is sold since the all deprecation claimed has been recaptured?

KochuK — Wed, 30 Aug 2023 18:42:12 GMT

Hi waveheatin, thank you for posting the question.

The starting point of California Form 540 is with Federal Adjusted Gross Income (AGI) - Form 1040, line 11.

All the rental activities, current final year activities plus recognition of suspended losses, depreciation recapture from prior years are reflected on Schedule 1 Additional Income and Adjustments to Income, Part I, lines 4 and 5, the total of which flows to Form 1040, line 8, which is before Federal AGI.

Please contact Turbotax for live assistance if you have further question.

How do I contact TurboTax?

https://ttlc.intuit.com/turbotax-support/en-us/help-article/account-management/contact-turbotax/L2y9ZKpQB_US_en_US

Hope this helps.

Thank you,

Kitty

Re: Should the loss carryover in rental home in California be allowed in the year of rental is sold since the all deprecation claimed has been recaptured?

waveheatin — Wed, 06 Sep 2023 15:04:33 GMT

Kitty,

Thank you for your response. Yes indeed the Federal AGI recapture the full amount of depreciation correctly. CA is based on the Federal AGI, and thus also recaptured the full amount of depreciation, but CA schedule adjusts (not allow) my loss by $5000. Essentially CA recaptured the $5000 depreciation but does not allow the same $500 as loss. So I am taxed by CA for the $5000 depreciation I am not allowed to deduct from my income in 2022.

Any suggestion?

Thanks again.

Frank

Re: Should the loss carryover in rental home in California be allowed in the year of rental is sold since the all deprecation claimed has been recaptured?

Mike9241 — Wed, 06 Sep 2023 16:40:21 GMT

I am not completely familiar with California law. However, since Ca has a different depreciation regime (so does my state in certain situations) your CA tax basis should only be reduced by the depreciation CA allows and since this is less the Federal your CA gain should be reduced accordingly. not sure how Turbotax handles this.

may want to contact support unless others respond with directions

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