topic Home depreciation recapture on primary residence with a rental room in Investors & landlords

Home depreciation recapture on primary residence with a rental room

will843 — Mon, 14 Sep 2020 21:57:36 GMT

I just bought a home (will be my primary residence for the next 5+ years) and plan on renting out a room. I want to understand if I will be able to avoid depreciation recapture tax on this property using the 250k/500k home sale capital gain exclusion since this is also my primary residence. Or will I be able to avoid capital gain tax but still need to pay the recapture tax?

Re: Home depreciation recapture on primary residence with a rental room

Critter-3 — Tue, 15 Sep 2020 00:06:45 GMT

You must take depreciation and recapture it when you sell ... only the cap gain can be excluded.

Re: Home depreciation recapture on primary residence with a rental room

Carl — Tue, 15 Sep 2020 00:51:04 GMT

You are required by law to take depreciation equal to the percentaqe of floor space that is "exclusive to the renter".

When you sell, you are required to recapture that depreciation and pay taxes on it *no* *matter* *what*. You can also expect you exclusion to be reduced by the percentage of floor space that was exclusive to the renter.

Now unrelated to taxes, in some states that offer a homestead exemption, if you have "any" business use of the property then your can't take the homestead exemption for each tax year there is business use. So that may be something you want to check out before applying for the exemption and later discovering the hard way that you were not entitled to it.