depreciation recapture

[dj772]

I have entered all the required information related to sale of long term rental residential property. On form 4797, I show a gain on the sale of the house (sales price minus adjusted book value). From everything I read, I anticipated some depreciation recovery showing up on line 31 of Form 4797. I entered the sales information for the land and the house in the depreciation section of the rental income section, anticipating all necessary forms would be completed but now I am not so sure. Does anyone have any insights on how this works?

[tagteam]

Are you using a desktop version of TurboTax? If so, enter Forms Mode and look at Form 4797 (Part III).

You should see depreciation allowed (or allowable) on Line 22. The program will calculate the correct tax rate on any recapture.

[dj772]

Thanks for your response. Am I correct that the difference between the allowed depreciation on line 22 and the cumulative depreciation taken is the depreciation recovery? I cannot find a worksheet showing how the allowed depreciation is calculated. Any suggestions?

[tagteam]

Look at your Schedule D Tax Worksheet (Line 40 to be exact).

[dj772]

Will do. Thanks

[Mike9241]

one way to determine if depreciation is correct is to download IRS PUB 946 and then go to Appendix A Chart 2 (following page 67) to learn what table should be used

for example residential real estate 27.5 years would lead you to table A-6,

https://www.irs.gov/pub/irs-pdf/p946.pdf 

use the column based on the month placed in service for year 1 and the % in that column for all full years rented (but not the final year).  in the final year rented from 13 subtract the number of months rented and look in that column for year 1

example rented 4 months net is 9 so you would add the % for year 1 in the month 9 placed in service column. 1.061%

this will not work if the % rented varied from year to year. then multiply the sum of the %s by the total cost less land cost. There should be no depreciation for land.