Depreciation Recapture
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Depreciation Recapture (by Taz [CT]) Feb 12, 2019 3:49 PM
       Depreciation Recapture (by GKARL [PA]) Feb 12, 2019 4:15 PM
       Depreciation Recapture (by Taz [CT]) Feb 12, 2019 4:52 PM
       Depreciation Recapture (by Susan [OH]) Feb 12, 2019 5:54 PM
       Depreciation Recapture (by TenantWhisperer [MA]) Feb 12, 2019 6:14 PM
       Depreciation Recapture (by moby [IN]) Feb 12, 2019 6:32 PM
       Depreciation Recapture (by #22 [MO]) Feb 12, 2019 6:40 PM
       Depreciation Recapture (by Robin [WI]) Feb 12, 2019 7:33 PM
       Depreciation Recapture (by Robert J [CA]) Feb 12, 2019 8:31 PM
       Depreciation Recapture (by WMH [NC]) Feb 13, 2019 4:30 AM
       Depreciation Recapture (by Steve [TN]) Feb 13, 2019 4:57 AM
       Depreciation Recapture (by Taz [CT]) Feb 13, 2019 5:17 AM
       Depreciation Recapture (by Taz [CT]) Feb 13, 2019 5:17 AM
       Depreciation Recapture (by Taz [CT]) Feb 13, 2019 5:17 AM
       Depreciation Recapture (by Taz [CT]) Feb 13, 2019 5:17 AM
       Depreciation Recapture (by Marv [IL]) Feb 13, 2019 5:17 AM
       Depreciation Recapture (by WMH [NC]) Feb 13, 2019 6:11 AM
       Depreciation Recapture (by David [MI]) Feb 13, 2019 6:28 AM
       Depreciation Recapture (by JB [OR]) Feb 13, 2019 8:32 AM
       Depreciation Recapture (by Taz [CT]) Feb 13, 2019 8:39 AM
       Depreciation Recapture (by Robin [WI]) Feb 13, 2019 10:10 AM
       Depreciation Recapture (by 6x6 [TN]) Feb 13, 2019 10:18 AM
       Depreciation Recapture (by Robert J [CA]) Feb 13, 2019 5:55 PM
       Depreciation Recapture (by Peter [NH]) Feb 14, 2019 4:54 AM
       Depreciation Recapture (by Marv [IL]) Feb 14, 2019 5:28 AM
       Depreciation Recapture (by 6x6 [TN]) Feb 14, 2019 4:31 PM
       Depreciation Recapture (by Robert J [CA]) Feb 15, 2019 9:14 PM
       Depreciation Recapture (by 6x6 [TN]) Feb 17, 2019 11:53 AM
       Depreciation Recapture (by Ray-N-Pa [PA]) Feb 18, 2019 7:13 PM

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Depreciation Recapture (by Taz [CT]) Posted on: Feb 12, 2019 3:49 PM
Message:

Okay, I was thinking about selling my rental property (I live in it). I just met with my tax person who said that I am just a few years from avoiding depreciation recapture because I have been in the house for almost 20 years. She indicated that after the 27.5 years of depreciation that the depreciation recapture goes away. Does anyone know if this is correct? I have never seen anything indicating that this may be the case. The only way I have seen that it has been avoided is by doing a 1031 exchange. --32.211.xxx.xxx




Depreciation Recapture (by GKARL [PA]) Posted on: Feb 12, 2019 4:15 PM
Message:

All depreciation is recaptured. It does not go away. --209.122.xx.xxx




Depreciation Recapture (by Taz [CT]) Posted on: Feb 12, 2019 4:52 PM
Message:

That's what I thought! --32.211.xxx.xxx




Depreciation Recapture (by Susan [OH]) Posted on: Feb 12, 2019 5:54 PM
Message:

Unless the rules have changed, WHEN YOU DIE, your heirs inherit your property without the depreciation being recaptured. They inherit at a "stepped up" basis of what the property is worth now. --76.189.xxx.xxx




Depreciation Recapture (by TenantWhisperer [MA]) Posted on: Feb 12, 2019 6:14 PM
Message:

Since when is 7.5 years a "just a few years"?

--73.16.xxx.x




Depreciation Recapture (by moby [IN]) Posted on: Feb 12, 2019 6:32 PM
Message:

Either I misunderstand depreciation or you need a new tax person. --68.60.xxx.xx




Depreciation Recapture (by #22 [MO]) Posted on: Feb 12, 2019 6:40 PM
Message:

If you don't think your cpa is great, fire them asap. I don't think your cpa is great. --174.234.xxx.xx




Depreciation Recapture (by Robin [WI]) Posted on: Feb 12, 2019 7:33 PM
Message:

Is it possible that you misunderstood what she said? After 27.5 years you can no longer depreciate rental property because it's fully depreciated.

Some people move into a rental property with the intent of living in it for 2 out of 5 years so that they can avoid the capital gains tax, but depreciation is specifically excluded.

Btw, a 1031 exchange doesn't avoid depreciation recapture, it just kicks the can down the road to a later date.

I'd ask your CPA one more time to clarify that. If she gives you the wrong answer again, it's time to find a new CPA. We fired ours after she failed to depreciate our office space, potentially costing us $$$.... --204.210.xxx.xxx




Depreciation Recapture (by Robert J [CA]) Posted on: Feb 12, 2019 8:31 PM
Message:

You sound like my friend that sold his duplex and was told by his accountant that his tax liability was only going to be $50,000. I told my friend that it's more like $225,000 to $250,000. The accountant, the real estate agent and other advisers told my friend that "Robert (me) is crazy and doesn't know his stuff".My friend just got notice from Uncle Sam and the Franchise Tax Board he now has a penalty, interest and taxes due -- Now it's closer to $300,000.

After 27.5 years on residential property and 39 years on commercial property the "Structure" has be fully deprecated. This means no more deductions for the building.

But when you go to sell this property, you are required to pay back 25% (Twenty Five Percent) of the total amount you were able to write off. So if you depreciated $100,000 over the 27.5 years, you will have to pay back $25,000.

On top of this you will have Long Term Federal Capital Gains Tax -- up to 20%. And also if you make a couple of hundred grand, then you might have to pay ACA (Affordable Care Act) tax of 3.8%.

It is clear that you didn't understand your accountant or he is a joker? --47.156.xx.xx




Depreciation Recapture (by WMH [NC]) Posted on: Feb 13, 2019 4:30 AM
Message:

And nowadays "living in a rental to turn it into your primary residence" is offset by the amount of time the place was actually a rental. New Tax Law. You can't just live there 2 out of 5 years and wipe out the fact that it was a rental. The time you live there personally is offset by the the time it was actually a rental. --50.82.xxx.xx




Depreciation Recapture (by Steve [TN]) Posted on: Feb 13, 2019 4:57 AM
Message:

Wait - Is your rental a single-family house? You said you live in it. Does that mean you no longer rent it and you are living there for now?

If that is so, all you have to do is live in the thing for 2 years out of the last 5 and the depreciation recapture goes away.

If instead, however, yours is a mulit-unit and you live in one of the units, my statement does not apply. --68.156.xx.xx




Depreciation Recapture (by Taz [CT]) Posted on: Feb 13, 2019 5:17 AM
Message:

Thanks,all. It is a two-family and I rent out half and live in the other half. It was a tax preparer that told me this not a CPA. Her assertion was that after the 27.5 years the depreciation is absolved. I agree with you guys and don't think that is correct. --166.149.xxx.xx




Depreciation Recapture (by Taz [CT]) Posted on: Feb 13, 2019 5:17 AM
Message:

Thanks,all. It is a two-family and I rent out half and live in the other half. It was a tax preparer that told me this not a CPA. Her assertion was that after the 27.5 years the depreciation is absolved. I agree with you guys and don't think that is correct. --166.149.xxx.xx




Depreciation Recapture (by Taz [CT]) Posted on: Feb 13, 2019 5:17 AM
Message:

Thanks,all. It is a two-family and I rent out half and live in the other half. It was a tax preparer that told me this not a CPA. Her assertion was that after the 27.5 years the depreciation is absolved. I agree with you guys and don't think that is correct. --166.149.xxx.xx




Depreciation Recapture (by Taz [CT]) Posted on: Feb 13, 2019 5:17 AM
Message:

Thanks,all. It is a two-family and I rent out half and live in the other half. It was a tax preparer that told me this not a CPA. Her assertion was that after the 27.5 years the depreciation is absolved. I agree with you guys and don't think that is correct. --166.149.xxx.xx




Depreciation Recapture (by Marv [IL]) Posted on: Feb 13, 2019 5:17 AM
Message:

If you are using MACRS depreciation, it does not go away.

It used to be that if you were using Double Declining Balance for depreciation, the recapture would go away. Nobody uses DDB any more. --173.15.xx.xxx




Depreciation Recapture (by WMH [NC]) Posted on: Feb 13, 2019 6:11 AM
Message:

Steve/TN, not true under the new tax laws. Actually not that new: 2009, I think. --50.82.xxx.xx




Depreciation Recapture (by David [MI]) Posted on: Feb 13, 2019 6:28 AM
Message:

so ... is a way around it to get a mortgage on your deathbed then have your heirs pay off the mortgage with the tax free proceeds of the sale? --199.247.xx.xx




Depreciation Recapture (by JB [OR]) Posted on: Feb 13, 2019 8:32 AM
Message:

I'm still hearing people saying that you can live in a property two of the last five years and avoid the repaying write-offs enjoyed as when it was a rental property. Just not true... --24.20.xxx.xxx




Depreciation Recapture (by Taz [CT]) Posted on: Feb 13, 2019 8:39 AM
Message:

Yeah, that got changed with the 2017 changes, I believe you have to live for 5 years now. --107.242.xxx.x




Depreciation Recapture (by Robin [WI]) Posted on: Feb 13, 2019 10:10 AM
Message:

WMH is right. The law changed in 2009 so that depreciation is captured no matter what and you only get to take the tax-free capital gains prorated for the proportion of time you lived in the property. If the years before 2009 were the rental years--anyway, it starts getting complicated. A good CPA will be able to tell you what applies to your specific situation. --204.210.xxx.xxx




Depreciation Recapture (by 6x6 [TN]) Posted on: Feb 13, 2019 10:18 AM
Message:

Great question. I just learned something. Thank you.

Robert J,it sounds like it is not worth selling a property at all. By the time the government gets through there is no profit left. Anything gained while renting, you just lost. --73.120.xx.xxx




Depreciation Recapture (by Robert J [CA]) Posted on: Feb 13, 2019 5:55 PM
Message:

6 X 6. Here in California we have to pay in the way of sales costs:

Federal Long Term Capital Gains tax, max rate 20%

State Tax, max rate 13.3%

Affordable Care Tax 3.2%

Realtors commission 6%

Closing costs, escrow 2%, transfer tax 2%

That comes to around 44.5%, OUCH!

So if one doesn't have an exit strategy, then owning rental profit wasn't that profitable. One can do a 1031 exchange, go into a TIC (Tenancy in common) or sale and do an installment loan paying the taxes slowing over time and collecting interest from the buyer.

In 2006-7, I sold a ton of units when the Capital Gains Tax was only 15% and the State tax was only 9.3%.

--47.156.xx.xx




Depreciation Recapture (by Peter [NH]) Posted on: Feb 14, 2019 4:54 AM
Message:

Wow great discussion. Yes you still have to pay recapture depreciation. I am researching Delaware Trusts for 1031 exchanges now in order to avoid this when I sell some more properties this year. It seems to be a booming industry. --75.67.xxx.xxx




Depreciation Recapture (by Marv [IL]) Posted on: Feb 14, 2019 5:28 AM
Message:

As for living in a former rental house, when you sell it you count the months you lived in it and count the months you rented and use the percentage to calculate residence exclusion. --173.15.xx.xxx




Depreciation Recapture (by 6x6 [TN]) Posted on: Feb 14, 2019 4:31 PM
Message:

Thank you Robert J.

What is the affordable care tax about? What does that have to do with property? --73.120.xx.xxx




Depreciation Recapture (by Robert J [CA]) Posted on: Feb 15, 2019 9:14 PM
Message:

6 x 6

When our last president took office, he passed the affordable care act, medical insurance for all -- even with pre-existing conditions. The cost for the government was in the Billions. To generate capital for this hey put a TAX on the Sell of Real Estate. If a single person makes over $200,000 in come with the capital gains tax, they needed to pay 3.2% tax towards medical insurance for all. For a couple filing together, if they make over $250,000, then they will have to pay this extra tax. --47.156.xx.xx




Depreciation Recapture (by 6x6 [TN]) Posted on: Feb 17, 2019 11:53 AM
Message:

Thank you Robert J for explaining. --73.120.xx.xxx




Depreciation Recapture (by Ray-N-Pa [PA]) Posted on: Feb 18, 2019 7:13 PM
Message:

Your ability to write it off from the initial investment goes away at 27.5. Uncle Sam will still want his money when you sell. It is 25% on the accumulated depreciation amount. He will also want a percentage of the long term capital gain. Greedy isn't he? --72.23.xxx.xx



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