TT not Calculating taxable gain on sale of home with Home Office Depreciation

[themadanimator]

I sold my primary home in July 2020 for $1,100,000. I had expenses in the sale of $46,000. I had a home office that I claimed depreciation of  approximately $50,000 over 10 years. Turbo Tax says I have a taxable gain of $50,000 but the amount I owe isn't changing. FYI, My basis for what I paid to purchase the house was originally $729,000. My adjusted basis for capital improvements I made over past 10 years is $785,000. Married filing jointly. I agree I don't owe a capital gain on the profit but isn't there a depreciation recapture because of the home office? Thanks for any insight!

[AmeliesUncle]

If you sold the home for less than its Basis, there is no tax on the depreciation, so the program is doing it correctly.

[themadanimator]

Thank you for your response but I didn't sell the house for less than my basis. I sold it for $1,100,000. My adjusted basis was $785,000.

[AmeliesUncle]

Ah, I misread it and thought you said you ADDED $785,000 of capital improvements to the original cost.

Yes, you are correct, there should probably be some tax due.

Where are you entering the sale in the program?  Are you entering the $50,000 of depreciation in that section?

Look at Form 8949 (or Form 4797).  Is it showing the sale?  It is showing the depreciation?

Is there anything on Line 9 of Schedule D?

Did you have any carryover capital losses that may be offsetting the losses?

Is your other income 'positive'?  Or do you have substantial losses (business loss, NOL, etc.) that may be offsetting the taxable gain of the house??  

[themadanimator]

Thanks for the info. I am entering the depreciation for the home office where it asks about the sale of the home. I'm getting the depreciation amount from form 8829 (I've been using TT since starting a home office so it's all there). Form 8949 shows the sale and depreciation with a gain of approx. $50,000 ($46,026) for the home office depreciation. It shows an adjusted amount of -$258,524 which is the amount that is exempt from gains. Line 9 of schedule D is blank, line 10 shows the sale of the house, basis, adjustments, and depreciation. I do show a Capital loss carryover (line 14) of -$81,047 and a net long term loss of -$35,017 (line 15). Is this what is cancelling out the gain? Thank you for your repsonse!

[AmeliesUncle · Accepted solution]

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@themadanimator wrote:

I do show a Capital loss carryover (line 14) of -$81,047 and a net long term loss of -$35,017 (line 15). Is this what is cancelling out the gain? Thank you for your repsonse!

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Yes, that is what is cancelling out the gain.  So when those losses are being carried forward to next year, they will be reduced by the $50,000-ish from gain from the house.

[themadanimator]

Thank you so much for the insight. I appreciate your taking the time to help me understand what was happening!