Will depreciations of furniture, washer/dryer, and fixtures in a rental property be recaptured when the rental property is sold?

[Sunny2August]

In a multi-year rental property that was sold in 2021, I bought furniture, washer/dryer, and some fixtures to the property at the beginning of renting out. The furniture was partially depreciated until it was scraped because of damage. The washer, dryer and fixtures were fully depreciated and went with the property. I have the following questions:

(1) Will the depreciation of furniture be included in the total depreciation for depreciation recapture even though the furniture was discarded long time ago and was not included in the cost basis?

(2) If the furniture depreciation needs to be recaptured, will the cost of furniture be included in the cost basis?

(3) Will the depreciation of washer, dryer, and fixtures sold with the rental property be recaptured? Can the costs be included in the cost basis?

Thank you very much for your advice.

[Mike9241 · Accepted solution]

when the property is sold you would need to allocate a portion of the sale price and sales expenses to these assets based on their relative Fair Market Value on the date of sale.  if the sales price less selling expenses is more than the remaining tax basis there is depreciation recapture. if you discard the item FMV = $0 so there is nothing to allocate and the asset should be deleted.

no, you can't add the cost of washers, furniture, etc to the cost of the building.  these assets are in a different depreciation class.

[Anonymous_ · Accepted solution]

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@Sunny2August wrote:

(1) Will the depreciation of furniture be included in the total depreciation for depreciation recapture even though the furniture was discarded long time ago and was not included in the cost basis?

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When you discard (scrap) a depreciable item, there is no recapture.

[ColeenD3 · Accepted solution]

I'll answer your questions as you asked them.

1) You do not have to recapture the depreciation on the appliances as they are not real property and are fully depreciated.

2) You do not include the price of the appliances in the basis of the house. You purchased them separately and got the tax benefit from them.

3)The appliances are being sold as part of the whole house. Just enter the information for the building and leave the appliances out of it.

[Sunny2August]

Hello Coleen,

Thank you so much for your comments. Very helpful.

If I deduct the appliances and fixtures from the sale price, how can I let IRS know why the property sale price is less than that on the 1099-S?

Thank you once again.

[ColeenD3]

Please see my answer under #3.

The appliances are being sold as part of the whole house. Just enter the information for the building and leave the appliances out of it.

You are not subtracting out the appliances. They bought a house, including the appliances. Again, these are minor amounts and not like an improvement.

[Sunny2August]

Hi Mike,

In TurboTax, how can I allocate or deduct (where to enter) the appliance, fixtures, etc. I added from the sale price of the rental property based on fair market values? Will IRS question why the sale price in my tax return and that on 1099-S are different?

Thank you very much for your advice.

[JohnB5677]

Yes, If you have assets that remain on the books when you sell a property, you will have to close each one of them out individually.  If you dispose of an item the value goes to zero.  If it was purchased with the property, a portion of the property cost would be applied to the asset.

The 1099-S is an information form.  If you make adjustments to it it's okay, but be sure to document why you made the changes.  That is always the Key when the IRS has questions.