Need help understanding selling a house

[Cake206]

Hello,

I need help understanding on this whole selling a house thing and calculating depreciation. I brought a house in 2013 for 223,000. I rented it out for the first 3 years, then I took over as my primary residence. I sold the house in 11/2021 for 525,000.

I enter all the info in software but left the depreciation value at 0 since I am not sure how to calculate that. Anyways at the end of it, I don't have to pay any income taxes on 162,000 BUT I do have to pay a capital gains tax 97,000. Which when done I owe $13000. 

I am filing jointly and did get a substitute form 1099-S. Is that correct, or is it something I am not understanding correctly? I thought anything over 250k for single and 500k jointly, you don't have to pay any taxes? Should I just not report the sale of my previous home?

[ColeenD3]

You absolutely have to include the depreciation that you took when it was a rental and under sale of home, you must state that at one time it was a rental. Look back in your records to find the amount of depreciation.

Since you lived in the house as a primary residence for 2 out of five years, you can exclude the capital gain, but not the depreciation. Print your return and read each line regarding the sale, including the worksheets, to find out what you entered.

[DanP0428]

You do not enter the depreciation. into TurboTax.  
Outside of TurboTax you calculate the Cost Basis of the Property.

Add together the original cost of the home, any major improvements made, and any costs involved in selling the property.  Then from that number, subtract the depreciation for the years when it was rented.  The result is your cost basis, and you enter the cost basis into TurboTax when you enter the sale of the rental property.

Here is some additional reading material Real Estate Tax and Rental Property - TurboTax Tax Tips & Videos (intuit.com)

[RaifH]

Yes, you do need to report the gain and you do need to determine the amount of depreciation you should have taken for the period that it was a rental. 

Although the period of time that you owned the home and used it as your primary home does qualify for the exclusion, the period of time you were not living in the home does not qualify. Since you rented it for approximately 3 out of the 8 years that you owned it, approximately 37.5% of the gain will be capital gains. Of that, any depreciation that you were required to take during the years you rented it would be potentially taxed at a higher rate. 

If you do not know how much depreciation you took during those years, you will have to refer to your tax returns for the years that you used it as a rental. If you have an asset worksheet from the last year you rented it, that should have the prior depreciation you could have taken and the depreciation you took that year. The sum would be the total depreciation. If you do not have that, your Schedule E for each year will have the depreciation you took. You would add those together for the total depreciation. 

Allowable depreciation must be reported whether or not you took advantage of the deduction in the years that you rented the property.