Depreciation recapture tax

[MathGuy81]

I sold my rental property last year.  Without the depreciation recapture, I had a capital loss.  But with the recapture, my tax liability was increased by around 9,000.  The thing is, had a net loss on my rental property EVERY year it was rented out.  And in some of those years, the amount of the net loss was greater than the depreciation expense, so in other words the depreciation expense gave me NO TAX BENEFIT that year.  So in computing the capital gain on my property sale, do I really have to add back ALL the depreciation expense.  Doesn’t seem fair that i should be taxed for something that gave me no tax benefit in previous years.

Thanks.

[Affordabletaxes2021]

Yeah, it’s required. It’s required that you take the depreciation and it’s required that it be recaptured upon sale. 

[Anonymous_ · Accepted solution]

---

@MathGuy81 wrote:

....do I really have to add back ALL the depreciation expense.  

---

Yes, you really do have to "add back" all of the depreciation expense.

However, note that all of your suspended (passive) losses are now released to be used against all other income.

[MathGuy81]

Thank you, tagteam!  Can’t believe I didn’t realize that.  I don’t think TurboTax picked up on that when I was entering info for the property sale.

[Donato Segal]

Have a Sub S Corp with a fully depreciated condo.  I sold condo and need to know how to add back depreciation on tax form and where to put it on schedule K-1s.

[Anonymous_]

Assuming this is rental real estate owned by the corporation (and further assuming you set this up properly in the program), then you would enter this under the Rental Real Estate tab (see screenshot).