Sale of rental property in another state

[alvarin]

Sold property in another state in 2021 that I bought in 2006 for $270K. Sale price minus cost of sale was $314K. Prior to 2021 I used property as vacation home for 7-10 days a year and it was then rented for 3-4 months per year. I have claimed total $84K depreciation. Property, depreciation included, always produced $10-12K  loss per year. 

Questions:

1. Turbotax Premier is figuring out a $128K capital gain from sale of property and have an approx. $32K Fed tax due and $13K in state tax due due to sale of property alone. Q1a: Why am I paying my state of residency tax for sale of property in another state?.  I thought only 25% of depreciation had to be recaptured but turbotax Premier is including all the prior depreciation. Q1b: Does that sound correct? 

2. Turbotax Premier has carryovers from prior years that I don't know what to do with:

a) Vacation Home Operational expenses : $10K (approx).

b). Vacation Home Depreciation: $16K (approx).

3. I have a couple of assets that were put in service 2-3 years ago and didn't finish depreciating: e.g. A.C./furnace that cost about $4K and had depreciated just $2.4K. What do I do with that?

4. Finally, I never filed State tax before for the state property was in because property always generated just losses. Do I have to file that state tax now to report sale and capital gain? 

Finally, Do you recommend I hire Turbotax help reviewing online my tax returns before I file or should I hire a CPA? I never had trouble before but I'm not sure sale of rental property is being handled correctly.

Thanks so much for any advice and/or help you can give me.   

Alvarin 

[DavidD66]

You are paying state tax to your state of residence because 100% of your income is taxable by that state, even if it was earned in another state.  To prevent double taxation, your home state will issue you a credit for the tax you pay to the state where the rental property was sold.  The amount of depreciation subject to recapture is determined by the amount of the gain on your sale.  If your gain is greater than the accumulated depreciation, then 100% of it is subject to the depreciation recapture tax.

Regarding the Vacation Home depreciation and expenses (suspended loss carryover?) you haven't provided enough information to advise how you should deal with this. The depreciation would lower your cost basis and increase your gain, while an unused loss carryover would reduce the gain.

For the partially depreciated assets, I would apply a portion of the sales price equal to their current book value (cost less depreciation).  You will have neither a gain nor a loss, and you get them off the books.

Yes, you have to file in the state where the property is located. 

I do recommend you either use TuboTax Live to help you prepare your return, or engage a local tax professional.

[alvarin]

Thank you so much for taking the time to answer my tax questions.  My gain, net sale price minus cost of property was only $44K while cummulative depreciation was $88K, yet it seems all the depreciation is being recaptured. 

You seem very knowledgeable and I will start with turbotax live as you suggest.

Thanks again.