I am looking for accumulated depreciation that is asked for on the sale of business property (total sales price, cost, depreciation taken?) does not transfer ?

[omarhass]

Thanks Carl for your prompt and very helpful response. 

[omarhass]

Thank you ThomasM for your helpful response.

You wrote:

"the next best thing would be to report the depreciation you deducted when you report the sale of the property."

You meant: "...the accumulated depreciation...."  that TurboTax has compiled until the sale of the property.

Please confirm or clarify.

Regards,

[Carl]

Please confirm or clarify.

All depreciation taken for the entire time you owned the property must be recaptured in the year of the sale.  Basically, the law reads (paraphrased) you must recapture the "higher" of all depreciation taken, or the depreciation you should have taken.

[omarhass]

Hi Carl,

I have a follow-up on this particular portion of our exchange: 

In my case, the depreciation calculated by TurboTax throughout the years was too inflated.

I doubt it, unless you entered incorrect information into the program.  What makes you believe it's inflated? Convince me.

=======

I went over the taxes of my previous years and I see a depreciation discrepancy that I hope you will be able to clarify.

The way I manually computed the depreciation is as follows:

I took the cost of land and divide it by 27.5.

Let's assume cost of land is $200,000 then depreciation should be: $7272.00

The property was rented for 7yrs 6months so the accumulated depreciation should be: $7272.00 x 7.5 = $54,545.45

If the above method is correct then I must have input incorrect information that inflated the depreciation.

Regards,

[Carl]

The way I manually computed the depreciation is as follows:

I took the cost of land and divide it by 27.5.

You have used what the IRS calls an "impermissible method" to compute depreciation. Since you did this for more than 2 consecutive years you will need to file IRS Form 3115 to fix this. While the TTX program does include the 3115, it is *NOT* simple by any stretch of the imagination. Therefore, you should seek professional help. This is especially important if your state taxes personal income, because this is going to be a double-whammy for you.  By all means, please seek professional help.

While possible, I doubt you'll be able to get time with a CPA before the Apr 18 tax filing deadline. So you may want to file an extension.  Keep in mind that only gives you an extension to file. It does not give you an extension to pay, if any taxes are due. So if you think you may owe taxes, you still need to make an estimated payment before the Apr 18 deadline. You can pay on line if you want, and need to, at www.irs.gov/payments. ***PRINT YOUR RECEIPT!!!***

Three things to keep in mind here when dealing with the IRS:

1. You are guilty until proven innocent.

2. The burden of proof lies on the accused (that would be you), and not the accuser.

3. If it's not in writing, then it did not occur.

So I stress again, PRINT YOUR RECEIPT regardless of the method you use for paying any estimated tax due, if you deem an estimated payment necessary.

The correct way to figure depreciation for residential rental real estate:

IRS Publication 946 at https://www.irs.gov/pub/irs-pdf/p946.pdf

Use the MACRS worksheet on page 36.

For line 6 of the worksheet, table A-6 on page 71 applies.

For line 7, it's the cost basis of the structure only, as the value of the land is never depreciated.

[Anonymous_]

@omarhass 

Did you actually sell this rental property in the 2022 tax year?

If so, you would not need to file a Form 3115 but, rather, simply enter the higher of the accumulated depreciation deductions you were allowed or were allowable (and in this case, it appears that you would enter the accumulated depreciation deductions you actually took - were allowed).

[omarhass]

Oops...sorry, I didn't mean for the  $200,000 to be the "cost of the land" but the cost basis of the property minus the cost of the land.  

[Anonymous_]

Did you sell or not? Have you taken too much depreciation over the years?

[Cruiserduck]

no

[Cruiserduck]

How do i report the sale of my property that is not my home?

[Anonymous_]

Enter the sale in the Stocks, Bonds, Mutual Funds, Other section of the program.

Note that if the home was held for personal use, a loss is not deductible.

[KrisD15]

Additionally, if you were renting it out, you would report the sale of the rental property in the rental section.

@Cruiserduck 

[Carl]

if you were renting it out, you would report the sale of the rental property in the rental section.

That needs clarification. If the property was still classified as a rental at the time you sold it *AND* the cost basis was correct, then yes, you report the sale in the SCH E section of the program. However:

1. If the property was converted to personal use in a prior year, then you report the sale in the "Sale of Business Property" section.

2. If the property was converted to personal use *and* was your primary residence at the time of the sale, you'd report the sale in the "Sale of Home (Gain or Loss) section. That section allows for consideration of depreciation recapture, if one makes the correct selections.

3. If at the time the property was converted to a rental, if your depreciation cost basis was lower than your acquisition cost basis and you sold at a gain, you report the sale in the "Sale of Business Property" section so the gain will be figured on the acquisition cost basis. Very few will have this specific scenario, but it can't be ruled out as impossible.

[omarhass]

Yes  I sold it and I took too much depreciation over the years.

[Anonymous_]

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@omarhass wrote:

Yes  I sold it and I took too much depreciation over the years.

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Then you simply need to report the total (accumulated) depreciation deductions you actually took.