The change in tax liability sounds too high for just being depreciation recapture on a 75k house.   ... View more

You would potentially owe depreciation recapture tax on the sale. ... View more

Investment income for the purposes of the EITC are the total of lines 8a (tax-exempt interest), 8b (taxable interest), 9a (ordinary dividends), and line 13 (capital gains).  Rental income or loss does not figure into the investment income calculation. ... View more

It shouldn't have been combined if you filled out your tax return correctly.  The passive income from the rental should have been shown on Line 17 of Form 1040, capital gains are shown on line 13 of Form 1040. ... View more

Does Schedule E Line 26 = 201K or -201K?.  Does Schedule 1 Line 17 equal -210K or 210K.  If it is negative, then it appears all the passive losses have been released upon the sale of Rental 3, and there will be no more passive loss carryovers. Check Form 8582, Worksheet 5 for any unallowed losses.  These are the losses that would be carried over to 2019. ... View more

All your suspended passive losses are released upon sale of the rental, not just those for the property you sold, assuming you have sufficient gain from the sale.  And since passive losses are ordinary income equivalents (they would have been treated as a reduction in ordinary income if they hadn't been suspended), they are treated as a reduction in ordinary income when released.  They are not treated as a cost basis adjustment. ... View more