Depreciation Recapture Offset for Low-Income Rental Property

Forum|Forum|2 years ago
January 5, 2024
2 replies
0 views

In 2020 I sold a rental property that had been available for and was rented almost entirely by a tenant with a Section 8 voucher. I understand there is an offset of 1% per month (over 100 months) of the depreciation recapture. But does that just mean that offset amount gets taxed at the capital gain rate, or is it not taxed at all? And how can I input that offset in Turbo Tax Home & Business? Can someone provide an example to clarify posting?

Best answer by AmeliesUncle

There are several variables for this, one of which is exactly how you were depreciating the property.

Generally, it will be taxed at your ordinary tax rate. But whether or not it is 'capped' at 25% or not depends on the exact circumstances of how you were depreciating the item.

I highly recommend going to a tax professional for this. Even more so because it seems like you are doing a late 2020 return, so there may be other factors involved.

Anonymous_

Employee

I'm going to page @AmeliesUncle for this.

AmeliesUncleAnswer

There are several variables for this, one of which is exactly how you were depreciating the property.

Generally, it will be taxed at your ordinary tax rate. But whether or not it is 'capped' at 25% or not depends on the exact circumstances of how you were depreciating the item.

I highly recommend going to a tax professional for this. Even more so because it seems like you are doing a late 2020 return, so there may be other factors involved.