How do you handle depreciation that occurs in the same tax year as sale of property?

[Brian Newsome]

We sold a single-family home in December 2023. It was not a 1031 exchange, so we are now calculating our taxes. I think I have figured out how to calculate depreciation recapture -- with one exception. How do you treat depreciation, both claimed and recaptured, for the same tax year in which the property is sold? 

I calculated my recapture by reviewing depreciation claims on my previous tax returns, but I wasn't sure what to do about 2023 since we owned the property for almost the whole year (closing was mid-December). 

1) Do I still claim depreciation in 2023 for the time we owned the property, even though the claims are on the same tax return as the sale? I know that depreciation is mandatory but wasn't sure how it worked in the year of the sale.

2) Likewise, is there recapture for 2023? If so, how do you calculate that since it is  also part of the same return as the sale? Does it go on the following year's tax return?

I would love it if the whole depreciation thing was just a non-issue in the calendar year of the property transaction and that there is nothing to claim or recapture, but I suspect that's not the case.

Your help is very appreciated!

[David M.]

@Brian Newsome

Yes, you claim depreciation for ~11.5 months 2023 --- as I recall on SchE.

It will all be recaptured via the other tax forms, e.g. f4797 and something like the SchD tax worksheet.

Depreciation unrecapture can be pretty wacky on the forms if you are trying to figure it out yourself.  Maybe if you are using Turbotax or something the program will figure it out.  Otherwise, consult a qualified professional.

Does that help?  Good luck.