Depreciation on rental house??
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Depreciation on rental house??
| Mon, 02-02-2009 - 7:08pm |
Anyone have any idea how I can determine how much depreciation was done on my rental house that I sold this year. I usually do turbo tax and it is saying I need to enter amt i depreciated it


I had/have kind of (long story) three rentals. The normal fed IRS depreciation is 1/27th per year of the building price not including the land. Basically it is 100% depreciated in 27 years, which means you will have to pay capitol gains at 100% of the sale value if you sold in year 28.
OK, you have a rental you bought for 35,000 and for simplicities sake, the land is worth $8000. So you now have 27000 to depreciate (see how simple I made the math) so in year 7, you will have depreciated 7000. (You took 1000 as a tax deduction against the property income each year.)
So in this year 7 you sell the property for 40000, you would pay capitol gains taxes on anything over the the $20,000 you have not depreciated yet, or $40,000, or 20,000, minus the 8000 you could not depreciate for the land.
Check with a tax adviser, or read the IRS publication, but this is how I understood it when I sold one property.
Is that as clear as mud?
-Marie
if you plan to sell the house within a say 5 years don't do depreciation because you have to pay it all back in capital gains when you sell it Raymond never counts depreciation because of that very reason.
Mary Ann
This is VERY bad advice as you are "charged" the depreciation (from the IRS's view) whether you actually claim it or not.
Jennifer
That is what I thought too Jennifer, thanks for adding to it.