Bought primary home in Oct 2003 and Sold in Sept 2022 with profit of 229000 and filing MFJ. Need help to report in Tax return. Rented only 1 room with attached bath for 2 1/2 years. Is depreciation matter? I never claimed any depreciation before.

[hshah15006]

Bought primary home in Oct 2003 and Sold in Sept 2022 with profit of ($229000 - less closing cost and upgrade expenses ($39000) = 190000 net gain) and filing MFJ . Need help to report in Tax return. Rented only 1 room with attached bath for 2 1/2 years. Is depreciation matter? I never claimed any depreciation before. Return asking to fill AMT Depreciation. Received the 1099-S from closing company What I should do?

[JosephS1]

Not knowing how you filed in previous years as to the room rental, the depreciation not taken does not matter.  If you were entitled to take depreciation, and from what you are describing you were, the IRS goes by the phrase "allowed or allowable"; meaning even if you did not take it you were entitled to and must account for it as such.

What you need to do is go back and amend the previous 2 years returns to account for the depreciation not taken, then carry the adjusted basis forward to this year for the calculation of gain, or partial gain to be claimed in this case as only a partial part of the house was rental property subject to depreciation and carryback.  The remainder of the house that was your personal residence is allowed the exclusion on the sale of a personal residence.

@hshah15006 

[hshah15006]

Thanks Joseph. I rented small portion of my house from March 2018 to Sept 2020. I reported in my respective Tax return. Now as I sold my this home (primary Residence) with gain of 229,000-39,000 expenditure for upgrade = 190,000 gain.  As the amount fo gain is not taxable, does depreciation matter? Now it is unnecessary more paperwork and not going to save any money in this case. So shall I mentioned $0 as depreciation and file the return?

[AbrahamT]

It's always best to keep proper records and maintain a depreciation schedule so it doesn't come to bite you if this becomes an issue down the road. Although, in your particular case, it wouldn't have any effect anyway because you are entitled to the capital gain exclusion, nonmetheless, the IRS might look at it and say that you may be trying to hide something as no depreciation is recorded.

[hshah15006]

Thanks. I think then Turbotax should improve their software to calculate depreciation for home owners and keep record. This way normal primary residence will have correct valuation