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Old 09-22-2019, 07:15 PM
 
85 posts, read 67,090 times
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I have a rental property that I have been renting for last 3.5 years. I am planning on selling it. I initially bought the home for 300k but now I am selling the home for $275.

Will I be incurring any taxes on the amount that I get from this transaction after the loan payment etc. ?
How is the that calculated ? There is of course depreciation of the house.

Also I own a house now which is my primary residence.

Thanks
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Old 09-22-2019, 07:49 PM
 
150 posts, read 33,172 times
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Quote:
Originally Posted by relocatetoxxxx View Post
I have a rental property that I have been renting for last 3.5 years. I am planning on selling it. I initially bought the home for 300k but now I am selling the home for $275.

Will I be incurring any taxes on the amount that I get from this transaction after the loan payment etc. ?
How is the that calculated ? There is of course depreciation of the house.

Also I own a house now which is my primary residence.

Thanks
You have a loss offset by recovery of the depreciation you took. If you have to ask this question it means you donít understand the tax treatment of rental property, depreciation recapture and the like. I would strongly advise you to engage a CPA or EA to handle your taxes for the year in which you sell the property.
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Old Yesterday, 09:13 AM
 
970 posts, read 869,139 times
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Quote:
Originally Posted by Spokaneinvestor View Post
You have a loss offset by recovery of the depreciation you took. If you have to ask this question it means you donít understand the tax treatment of rental property, depreciation recapture and the like. I would strongly advise you to engage a CPA or EA to handle your taxes for the year in which you sell the property.
Seconded. Unclear whether you've been calculating your depreciation properly, either. You need a tax pro.
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Old Yesterday, 10:09 AM
 
73,552 posts, read 73,361,051 times
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They better have since it is recaptured regardless if they did or not
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Old Yesterday, 10:24 AM
 
150 posts, read 33,172 times
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Quote:
Originally Posted by mathjak107 View Post
They better have since it is recaptured regardless if they did or not
Exactly, the IRS will recapture the depreciation on the improvement value (purchase price less land value) regardless of if the seller depreciated or not on their Schedule E.
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Old Yesterday, 10:25 AM
 
73,552 posts, read 73,361,051 times
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Quote:
Originally Posted by Spokaneinvestor View Post
Exactly, the IRS will recapture the depreciation on the improvement value (purchase price less land value) regardless of if the seller depreciated or not on their Schedule E.
Yep , their stance is you either knew you needed to take it or should have known
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Old Yesterday, 12:25 PM
 
654 posts, read 340,089 times
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Quote:
Originally Posted by mathjak107 View Post
Yep , their stance is you either knew you needed to take it or should have known
Exactly- any landlord should be deducting depreciation since the IRS will do it for you if that is not the case.

Then you get to pay penalties on top of that.
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Old Yesterday, 01:09 PM
 
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Originally Posted by LHS79 View Post
Exactly- any landlord should be deducting depreciation since the IRS will do it for you if that is not the case.

Then you get to pay penalties on top of that.
Are you sure about that. Since IRS penalties are based on the amount of underpayment, how would they assess any penalties on a failure to depreciate since the effect of not depreciating is potentially paying higher taxes on the rental income. Once you recapture the depreciation, you pay the tax on the recaptured depreciation so once again, unless you fail to pay the tax on time, there would be no penalties. I suspect the IRS is happy to accept the higher tax payment generated by failing to claim depreciation along with the recaptured tax on the depreciation you didn’t take. I am at a loss to see where penalties would come into play in this scenario?

On thing some folks do if they make this error is change their accounting method and claim “catch-up” depreciation.
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Old Yesterday, 01:54 PM
 
73,552 posts, read 73,361,051 times
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Quote:
Originally Posted by Spokaneinvestor View Post
Are you sure about that. Since IRS penalties are based on the amount of underpayment, how would they assess any penalties on a failure to depreciate since the effect of not depreciating is potentially paying higher taxes on the rental income. Once you recapture the depreciation, you pay the tax on the recaptured depreciation so once again, unless you fail to pay the tax on time, there would be no penalties. I suspect the IRS is happy to accept the higher tax payment generated by failing to claim depreciation along with the recaptured tax on the depreciation you didnít take. I am at a loss to see where penalties would come into play in this scenario?

On thing some folks do if they make this error is change their accounting method and claim ďcatch-upĒ depreciation.
There is no penalty on recapture....

You can only reclaim 3 years of depreciation by filing amended returns, then you are out of luck for the rest
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Old Yesterday, 02:03 PM
 
150 posts, read 33,172 times
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Quote:
Originally Posted by mathjak107 View Post
There is no penalty on recapture....

You can only reclaim 3 years of depreciation by filing amended returns, then you are out of luck for the rest
I not sure it is that easy. My understanding is, in the case of unclaimed deprecation, is that you can go back and file an amended return for the previous year as long as you haven’t filed the current year return. You can’t go back more than one year via amended returns. If you missed more than one year, you need to file Form 3115 to change your accounting method and then claim catch-up deprecation as an adjustment. This is assuming the taxpayer failed to claim depreciation from the first year that the asset was placed in service. If they depreciate, then miss a year, I believe that can be solved with an amended return. That is my understanding from looking at my EA training materials.

You are correct, there is no penalty associated with failing to claim deprecation nor on the recapture.
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