topic Publication 523 implications for tenancy in common in Investors & landlords

Publication 523 implications for tenancy in common

SR5060 — Tue, 10 Feb 2026 09:31:18 GMT

How do the 523 rulings function for the sale of a home with "tenancy in common" where one owner is the primary residence and the others are non-occupying owners? specifically, in terms of depreciation recapture. my assumption is that this type of structure would not qualify for depreciation recapture as it is a primary residence for one of the owners, but does this logic extend to the non-occupying owners as well?

The line I am hung up on is: "List the total of all depreciation deductions that you took or could have taken for the use of your home for business or rental purposes"

its not clear if the non-occupying owners "could have taken" depreciation, given the vagueness of that statement.

Re: Publication 523 implications for tenancy in common

JulieS — Thu, 25 Jan 2024 14:53:56 GMT

It depends on whether the home has any business use in the past. You need to separate the question of residence from the question of business use.

An owner who doesn't use the home for business can't take depreciation on the property.

Business use of a residential property includes rental use and home office use, including storage. If there is no business use, there's no depreciation or recapture, for any owner.

Re: Publication 523 implications for tenancy in common

SR5060 — Sun, 28 Jan 2024 13:30:32 GMT

Thanks that makes sense, does that extend to property "not rented for profit" as mentioned in pub 527? Or, because it's a rental, even if not collecting profit, it would fall under depreciation recapture rules.

Re: Publication 523 implications for tenancy in common

DianeW777 — Mon, 29 Jan 2024 14:54:21 GMT

It depends. If you used a Schedule E on prior year returns to report the rental income and expenses, even if rented not for profit, it was limited to the amount of rental income. No amount of deductions over the rental income would have been allowed on a correctly filed tax return. If you actually did depreciated the property and any of the depreciation was used to reduce the income, then that amount would be required to be recaptured and reduce your cost basis.

If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year.

If you never depreciated the property due to the intent of not for profit during any and all rents, then there is nothing to recapture when you sell your home.

@SR5060