Calculating depreciation recapture tax at federal and state level on sale of primary home used for rental

[TaxWander]

We had a rental property, which was our primary home for 2 out of the last 5 years that was recently sold. I understand that qualifies us for the primary home sale capital gains exemption of $500k (joint returns). However, since were renting it for 2.8 years there's some depreciation that has been taken on the property.

Since it's time for making quarter estimated payments, I have a few questions:

1. Do I need to pay the estimated taxes quarterly or by the year end for any taxes related to this property sale?

2. How do I calculate the estimated tax due for the depreciation recapture, is simply 25% of the total accumulated depreciation taken? Depreciation has been taken for 2021, 2022 and 2023 but 2024 taxes aren't filed yet, should I take into account the expected partial year depreciation for 2024 while calculating the depreciation recapture tax?

3. Is the depreciation recapture tax due only at the federal level or even at state (GA) level?

4. Since we qualify for the 500k capital gains exemption (and we are under that limit), are there any other taxes that are due for this sale at the federal or state (GA) level?

[Carl]

1. Quarterly taxes you pay are based on the amount of taxable income received for that quarter. So if you send the IRS at least 20% of your gain, you'll be fine come tax time. If the gains on the sale will make your total taxable income for the year more than $201,050 then send the IRS 25%. (See the tax brackets for MFJ at https://taxfoundation.org/data/all/federal/2024-tax-brackets/)
For your state, send a percentage equal to the highest tax rate to be safe. Generally, state tax rates are lower than federal rates.

2. Since recaptured depreciation is taxed at a maximum of 25% at the federal level, that's what I'd send to the IRS. If your rate turns out to be lower, that just means you get some of it refunded at tax filing time.

3. Recapture is required at the state level for GA.
4. Can't speak for the state. But at the federal level you "will" pay taxes on the recaptured depreciation, as that is not included in the capital gains tax exemption.

[TaxWander]

Super helpful! One clarification, the capital gains will be 0 (since the total gains are less than the 500k exemption for a joint return). However I'm trying to see how to get the rough estimate for the depreciation recapture. It's basically the depreciation that's been claimed on the home for the duration it was a rental property. I.e. It's the cumulative depreciation that been taken on the home on the tax returns from the the time it was rented till it was sold. Is my understanding correct? If so, then I should also add the "expected" depreciation that will be claimed for 2024 tax returns (filed in 2025) when calculating my cumulative depreciation recapture amount?

[Mike9241]

yes. the depreciation recapture is for all depreciation taken which includes the year of sale.