San Francisco, CA · Member since 2015 · 2 posts · 0 votes
I have a rental property with the following situation:
-$155K of passive carryover losses
-$100K of depreciation taken
-$700K adjusted cost basis (purchase price less depreciation)
- $775K net sale (selling price less realtor fees)
So my question is:
1. Under this situation I owe no capital gains but I owe 25% recapture depreciation x $75K for federal taxes?
2. What happens to the $25K of the $100K total depreciation that wasn't recaptured?
3. Can I still apply the full $155K of passive carryover losses to my ordinary income or will this be reduced by the $25K deprecation that wasn't recaptured?
I have a rental property with the following situation:
-$155K of passive carryover losses
-$100K of depreciation taken
-$700K adjusted cost basis (purchase price less depreciation)
- $775K net sale (selling price less realtor fees)
So my question is:
1. Under this situation I owe no capital gains but I owe 25% recapture depreciation x $75K for federal taxes?
2. What happens to the $25K of the $100K total depreciation that wasn't recaptured?
3. Can I still apply the full $155K of passive carryover losses to my ordinary income or will this be reduced by the $25K deprecation that wasn't recaptured?
1. You will only pay the recapture up to that point.
2. It is carried forward until such time as it may be applied to a future gain.
3. Yes, that will be applied at such time and NO it will not be reduced by the 25k of un-recaptured depreciation.
I have a rental property with the following situation:
-$155K of passive carryover losses
-$100K of depreciation taken
-$700K adjusted cost basis (purchase price less depreciation)
- $775K net sale (selling price less realtor fees)
So my question is:
1. Under this situation I owe no capital gains but I owe 25% recapture depreciation x $75K for federal taxes?
2. What happens to the $25K of the $100K total depreciation that wasn't recaptured?
3. Can I still apply the full $155K of passive carryover losses to my ordinary income or will this be reduced by the $25K deprecation that wasn't recaptured?
1. You will only pay the recapture up to that point.
2. It is carried forward until such time as it may be applied to a future gain.
3. Yes, that will be applied at such time and NO it will not be reduced by the 25k of un-recaptured depreciation.
You will have an ordinary loss that will be triggered that year that will offset your other income NOT just capital gains. (no carryover unless a NET operating loss occurs) *That means it would offset ALL of your income and then some.
Depreciation that is not recaptured will carry over several years until used.
@Steven Hamilton II upon sale of this property, don't the passive carryover losses get added to the adjusted cost basis? So his new cost basis should be $855k and thus, no taxes owed regarding the recapture depreciation?
Carryover losses have nothing to do with basis. They are simply released at the time of sale and can be applied against any income, including W2 income, as @Steven Hamilton II explained.
However, I'm not sure what Steven meant with his #2 point about the excess depreciation when he said "2. It is carried forward until such time as it may be applied to a future gain." and "Depreciation that is not recaptured will carry over several years until used."
I don't believe this is so. That unrecaptured depreciation was figured into the sales numbers, and it dies with the sale.
@Steven Hamilton II upon sale of this property, don't the passive carryover losses get added to the adjusted cost basis? So his new cost basis should be $855k and thus, no taxes owed regarding the recapture depreciation?
No, they do not. They are treated entirely separate and actually in a much more favorable way. They offset against your HIGHEST tax rate as opposed to capital gain rates.
Carryover losses have nothing to do with basis. They are simply released at the time of sale and can be applied against any income, including W2 income, as @Steven Hamilton II explained.
However, I'm not sure what Steven meant with his #2 point about the excess depreciation when he said "2. It is carried forward until such time as it may be applied to a future gain." and "Depreciation that is not recaptured will carry over several years until used."
I don't believe this is so. That unrecaptured depreciation was figured into the sales numbers, and it dies with the sale.
I was referring to any PAL that was carried forward until the sale itself.
Is the annual depreciation minus the profit being offset by the depreciation my passive loss carryover for the year?
For example: I purchase a $275,000 rental property. Annual rental income is $5,000. Annual depreciation is $10,000.
I claim $0 annual profit.
Do I claim $5,000 passive loss carryover each year? Then when selling the property after a year for $275,000, do I pay 25% tax on the $10,000 gain ($275,000-adjusted cost basis of $265,000)? ...but use the $5,000 passive loss carryover to reduce my income?
Many posts talk a out the unused depreciation capture living on.
Does this mean any future real estate the op sells will have the depreciation recapture amount and taxes tacked on top of it?
If so, is that the only case where it will be revived? (Imagine a world where this is their only real estate investment does it apply to any other sales of assets or sources of income?) does it die with the OP when he passes?