Clients sold their rental home within the personal home exemption period for exempting capital gains. Shouldn't they have to pay taxes on the recaptured depreciation?

Forum|Forum|6 years ago
December 7, 2019
6 replies
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They lived in it first, then it has been a rental property since. They fall within the exemption time frame to exempt the capital gains but the depreciation is not carrying over to Sch D. Should it?

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Best answer by TaxGuyBill

Have you entered the depreciation on Line 30 of the Home Sale Worksheet? Is Line 7 of that worksheet showing a Gain? It is working for me.

For future reference, you can enter the sales information on the rental's Asset Entry Worksheet, then "link" it to the Home Sale Worksheet (click the blank area next to the words).

T

TaxGuyBill

First, can you confirm that the *IS* a gain?

Where are you reporting it? Are you entering the sales information on the Asset Entry Worksheet in the rental section? Or are you filling out the Home Sale Worksheet? Or something else?

As a side note, it is not "recaptured" depreciation. The gain and resulting tax on the sale of real estate is called "Unrecaptured Section 1250 Gain".

U

utah-arizona-taxladyAuthor

Level 6

TaxGuyBill. Thank you for correcting that for me. I tried first entering the sales info on the asset Entry worksheet but I couldn't see anywhere to exempt the gain. So, I did it on the Home sale Worksheet. I was sure that they would have to pay the taxes on the Unrecpatured Section 1250 Gain (depreciation they took) and it shows up but is not transferring to the Sch D. Then I thought...well, maybe they don't....but thought I better check with you guys.

T

TaxGuyBillAnswer

Have you entered the depreciation on Line 30 of the Home Sale Worksheet? Is Line 7 of that worksheet showing a Gain? It is working for me.

For future reference, you can enter the sales information on the rental's Asset Entry Worksheet, then "link" it to the Home Sale Worksheet (click the blank area next to the words).