Depreciation Recapture

[mytaxabc]

Greetings! This is my first time to use TurboTax for my tax return. Can I have a question about Sales of Home (gain or loss) in the TurboTax Premier? I was relocated to the U.S. in August 2023. My primary home was rented out since August 1, 2023, and sold on February 1, 2024. For 2023 tax return, I didn't pass the substantial presence test, so I filed it as a nonresident alien. I didn't report any rental income and depreciation on my 2023 tax return since those were non-U.S. passive income.

(1) Now when it comes to 2024 tax return, do I need to report depreciation recapture from August 1, 2023 to February 1, 2024 or just from January 1, 2024 to February 1, 2024?

(2) If the house was co-owned (50/50), should I just report 50% of the depreciation value?

[MaryK4]

1). You will only report the depreciation for January 1 to February 1, 2024.  This is because you did not claim the depreciation on your U.S. nonresident tax return so you did not receive the benefit of the deduction.

2.) Yes, you should have reported your share of the income and expenses for the rental if it was co-owned so your depreciation basis would be 1/2 of the value when placed in service.

[mytaxabc]

Thank you, Mary. I'm in the Sale of Home (gain or loss). There is a question for depreciation after May 6, 1997 and AMT. Is that something I need to calculate by myself? What is the formula in my case?

[PatriciaV · Accepted solution]

This is where you enter the depreciation taken for the two months the home was rented in 2024. You can find this amount on the Depreciation Report for Schedule E in your current return. There should also be a similar ATM Depreciation Report.

Enter the amount from the Current Depr column from each report.

You can view these reports in TurboTax Premier using Forms Mode. 

1. Open your return and click the Forms icon in the TurboTax header. 
2. In the list of Forms in My Return on the left, find Schedule E, then Depr Report and AMT By Form. 
3. Click each form name to open it in the large window. 
4. The Print button is in the form footer. 
5. Click Step-by-Step in the header to return to the main screens.

[mytaxabc]

Thank you, Patricia. I've managed to find the depreciation in the Forms following your advice. If the house is co-owned (50/50), should I halve the total selling price and selling expense when I enter them to determine the gain if I file separately?

[PatriciaV]

Yes, if you are not the sole owner of the property, only half of the sales proceeds would be income to you. Also, split any selling expenses and the adjusted basis. In other words, enter into TurboTax only your portion of the sale. (You'll need to do the calculations yourself - the program isn't set up to do that for you.)

[mytaxabc]

Thank you, Patricia. That answered my question.