Primary Home Sale - Depreciation

[SimplyGeorge]

We bought our home in 2007 and moved into it.  In 2009-2010, the economy suffered and so did our jobs.  After failing to sell our house for two years, we moved out in 2012 and rented it our while staying with family.  We returned to our home in 2015, and lived there until recently selling in 2023. 

While we rented it out for those three years, we filed the depreciation.  We moved back for 7-8 years prior to selling last year.

Are there any circumstances where we wouldn't be liable for income tax on the prior depreciation?

[Mike9241 · Accepted solution]

No. also, because you converted your residence to a rental and then back to your residence your home sale exclusion will be limited.

the comp is not exact because full dates weren't provided.

you owned it for about 16 years and rented it for about 3 years. 

approx max exclusion = years of qualified use (the years not rented 13 years)

years owned about 16. thus max will be about 13/16*500000

when you enter the home sale data in Turbotax and properly answer the questions, Turbotax will 

compute the allowable HSE. 

[SimplyGeorge]

Thank you.  I was confused about listing Non-Qualified Use.  The TurboTax help said that I didn't need to list the rented period in a few situations.  1) We used the house as our primary residence prior to renting.  2) We moved out temporarily due to job change health, etc.  3) Military.

Did I misunderstand this part?  Do I have to list the Non-Qualified Use?

[AmeliesUncle]

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@SimplyGeorge wrote:

1) We used the house as our primary residence prior to renting. 

2) We moved out temporarily due to job change health, etc. 

3) Military.

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1) That is only if you did NOT move back into it.

2) That is only if it was less than two years.

3) Were you in the military during that time, on qualified extended duty?

[AmeliesUncle]

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@Mike9241 wrote:

thus max will be about 13/16*500000

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It would be 13/16th of the gain (not including the gain due to depreciation).  So some will be taxable even if the gain is less than 13/16th of $500,000 (plus tax on the gain due to depreciation).