Do I owe recapture or capital gains if I lived in a house 11 of 17 years, rented it out 6? Bought for 80k, sold for 123k. Lived in it when it sold.

[samandjennyd]

I lived in this home 2003 and 2004 then rented it out 2005 to 2010.  Moved back in 2010 until selling in 2020.  What do I need to do regarding recapture for the years it was rented out?  I bought this house for 80k and sold it for 123k.  There were well over 40k in upgrades to the house between 2010 and 2020 when I lived in it again.

[AmeliesUncle]

You should be able to report it in the Sale of Main Home category and it should walk you through things.  But read the screens VERY carefully, as they can be confusing.

One screen will say something like did you use this as a Home Office, and you need to say YES.  That is where you enter the depreciation that you took when it was a rental.  That amount of depreciation will be taxable now.

Although the gain from the sale of your main home can be "excluded" (no tax), the laws changed in 2008, so in your situation your capital gains will be prorated.  The prorated period when it was a rental from 2008-2010 will be taxable.  But again, if you read the screens very carefully, it should walk you through things.

[Anonymous_]

I am posting a couple of screenshots where, as @AmeliesUncle stated, you need to proceed cautiously.

[Hal_Al]

It doesn't sound like you have much (or any) capital gains to prorate.  "I bought this house for 80k and there were well over 40k in improvements".  $3000 over $40,000?  Was the $123K sale price before or after expenses of sale?   $123,000 minus 80,000 + 43,000(+/-) = 0 capital gains.

It gets even more complicated if you have a capital loss. 

You still have to recapture (pay tax on) the depreciation allowed or allowable.  But, that's a single entry in the interview.