Sale of Home Previously Taken Home Office Deduction with Depreciation

[gregsanchezz]

In 2020 I sold my home which I previously had take a home office deduction for many years.  Included in the home office deduction was depreciation expense.  I have rolled my return forward to 2020 and have entered the sale of the home.  Turbo Tax did ask me how much depreciation I previously took.  But it didn't really do anything.  It said you have a loss on the sale of your home, personal losses are not deductible - that makes sense.  But don't I need to "recapture" depreciation expense from the years that I took a home office deduction?  If so, where do I enter that in Turbo Tax.   Also, what do I do about the home that is entered in the home office section.  Do I just delete it?

[Mike9241]

it depends on the loss. is the loss computed taking into a/c the depreciation taken? was any portion of the say the house cost $50K and you took $10K in depreciation. if you sold it for $40K net of selling expenses or less there would be no recapture. any amount between $40K and 50K there would be recapture up to the amount of depreciation taken.   

if you couldn't deduct all the depreciation due to the business income limit,  then the depreciation to be taken into a/c would only be the amount you actually deducted. 

[gregsanchezz]

Rounded numbers....Sale of home $509k.  Selling expenses $35k.  Purchased home for $469k, but did a remodel for $60k, Converted AC to refrigerated air for $16k.  So my basis was way over what I sold it for.  Depreciation taken in previous years in my home office deduction was $4,379 (so not big dollars).  I just don't see Turbo Tax calculating recapture.  Maybe because my loss is enough based on your initial comment?

[Mike9241]

based on those figures your net selling price is way below the depreciated basis so there is no recapture. 

[gregsanchezz]

Thanks.  Quick question though.  I put in a large sale price just to see what turbo tax would do if it calculated a gain.  But the gain I input wasn't more than $500k exclusion.  The gain was $74k.  I answered all the questions in TurboTax correctly, i.e., we lived in home 2 of the last 5 years, we didn't sale another home, etc.  All the questions I answered would exclude the gain, but Turbo Tax still says I don't qualify the the exclusion.  It makes no sense.   I have used Turbo Tax forever, but so far this year, it is not making sense at all.

[choquette48]

"...if you couldn't deduct all the depreciation due to the business income limit,  then the depreciation to be taken into a/c would only be the amount you actually deducted. "

I have a similar situation and am wondering how to determine the amount of depreciation I actually deducted. 

I claimed $44k in depreciation over several years for a home business that ended in 2021.  I sold the home this year (2023) for a gain.  My business was not profitable enough to deduct all of my expenses and I ended with a $26k business loss carryforward.  Do I have to recapture the full $44k in depreciation, or can I reduce the $44k by the $26k in undeducted expenses to recapture only $18k of the depreciation?  (or perhaps some sort of proportional calculation)?

Any advice would be greatly appreciated.

[DaveF1006]

No, you would need to report the full $44,000 in depreciation as this was the amount of depreciation you have taken in the past. You are not allowed to prorate the net operating loss and this will need to be carried forward indefinitely until absorbed.