Depreciation recapture

Forum|Forum|4 years ago
April 13, 2022
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We sold a vacation home in 2021 that we used both as a business and for personal use, which varied over the course of ownership(15 years) . When determining depreciation recapture, do I use the prior depreciation from form 4562(plus the current depreciation from 2021) or do I add up the depreciation reported on Schedule E. How do I handle the Depreciation Carryover that's shown on Schedule E worksheet?

Carl11_2

Employee

YOu have to recapture all depreciation taken; not just the SCH E depreciation. Since you have some sort of "business use" for the property (home office for SCH C business at one time maybe?) you have to recapture any depreciation taken on that also.

do I use the prior depreciation from form 4562(plus the current depreciation from 2021)

Yes. Add together the amounts in the "prior years depr" column and "current year depr" column for the total amount of depreciation taken on that specific asset. Then if you have depreciation taken for other than rental purposes (such as a SCH C business) you'll have to add in that depreciation also.

How do I handle the Depreciation Carryover that's shown on Schedule E worksheet?

Typically, in the tax year you report the sale, all PAL carryovers on the form 8582 are fully deductible. That's not true if you have multiple rental properties or aggregated properties, until you sell the last rental or the last asset in the aggregate.

Now if you're reporting the sale in the SCH E section of the program then the program takes care of all this stuff for you. But I get the impression you're reporting it in the Sale of Business Property section because you have more than just SCH E depreciation to recapture.