Depreciation of rental property affecting the sale of property on taxes

Forum|Forum|2 years ago
March 8, 2024
1 reply
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We own a mult-family building. We live in 1/2 of the building and the other half is divided into two apartments. We have regularly rented the apartments for many years. Soon we will have depleted the 27 year depreciation. If we choose to sell the building, after fully depreciating 1/2 of it from the original basis how does that affect capital gains and taxes? Suggestions for specific documents from IRS might be helpful. Any advice is welcome.

TurboTax Home & Biz Windows

AmeliesUncle

It is treated as two sales. Half is the sale of your personal residence and half is the sale of a rental property.

For the rental property, the gain due to the depreciation is taxed at your regular tax rate, up to 25%. The rest of the gain is long-term capital gain, usually taxed at 15%. However, that 'extra' income could affect other things, such as subjecting you to the 3.8% Net Investment Income Tax and/or reducing (or eliminating) some tax credits or deduction that you otherwise would have qualified for.

CaddyGrnAuthor

Employee

Thanks so much for your prompt reply. If we decide to sell our property later on, I will try and do "homework" regarding this beforehand so I won't get any real unexpected surprises!