Where do I add depreciation recapture after selling a rental investment property?

rgay22
rgay22 Member Posts: 2 Newcomer
in Filing my taxes

Hello, I have sold a residential rental property that I have depreciated in past years. How do I addmdepreciation recapture to my 2024 tax return? Thanks.

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Answers

  • KristineS
    KristineS FreeTaxUSA Agent Posts: 276 image

    Hi gray22,

    Thanks for your question and joining our Community.

    Depreciation recapture is calculated on Form 4797 based on your entries of the rental property and it's historical rental time period in Schedule E. When you enter the property in the Depreciable Assets section of Rental Income, you will enter all the information about the sales of the property and the depreciation recapture will be done for you. Our software will automatically calculate it for you. There's nothing for you to add.

    If however you are referring to total prior year depreciation already claimed to add that up, if you didn't use FreeTaxUSA software last year, you can look at your depreciation worksheets at the end of your 2023 tax return to find both the prior year depreciation (years 2022 and earlier) and current year depreciation (year 2023). Adding those two figures together gives you your 'total prior year depreciation' to claim on your 2024 Schedule E for the rental property.

    If you rented anytime in 2024, you'll have both current year depreciation, as well as depreciation recapture calculated for you automatically by our software program.

  • rgay22
    rgay22 Member Posts: 2 Newcomer

    Kristine, thank you. Is the captial gains calculated in that same section? Or do I need to enter it seperately as a 1099 s?

  • KristineS
    KristineS FreeTaxUSA Agent Posts: 276 image

    Hi again gray22,

    If you have Form 1099-S for the sale of the rental property, enter your rental property information in the  Rental Income (Schedule E)  section. Then answer Yes  to the question on the Rental Income Information screen that asks if you disposed of your entire interest in the property.

    Capital gains or losses are calculated, and the program reports them on Schedule D.

  • matax
    matax Member Posts: 1 Newcomer
    edited February 8

    I am selling a section 121 exclusion eligible home that has both 1) depreciation recapture from home office use from 2018-2023 and 2) depreciation recapture from rental of the home after I moved from 2024-2025. I do not see anyway in the software to enter each type of depreciation separately. IF I enter the rental depreciation on the Schedule E section, then the software doesn't ask me if I have home office depreciation in the Special Income Sale of Home Section. I can't correctly enter the home office depreciation in the Schedule E section since the date of entering service for the Schedule E rental is after the home office deductions were made. Please advise.

  • MatthewD
    MatthewD FreeTaxUSA Admin, FreeTaxUSA Agent Posts: 843 image
    Hi Matax,

    Depreciation recapture may be entered in two places.

    1. When you sell a rental property in the Rental Income using the Depreciable Assets
    2. Under the Income menu see, "Sale of Business Assets" and then the "Sale of Business Assets Converted to Personal Use"

    Using these two sections you may be able to report the correct amounts and types of depreciation recapture. I recommend that you also contact Customer Support to assist you and share your details.

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