recaptured depreciation is killing me! accountant help

[Alan Brown]

Hi I'm pretty sure I'm an idiot, but I'm getting slapped hard for it (again!)... I always thought that depreciating your property (and getting a tax write off for it) was permanent... So, a few years ago when I had a 1031 falling through, and my accountant said I'd owe $90k in taxes because of the recapture and the gain, of course we MADE the 1031 HAPPEN!  

So I just sold a property this last summer and I calculated that my sales cost, less sales costs, minus adjusted basis, was my taxable gain... about $35k in gain.  We needed the cash, so I decided to take the hit on $35k... not $113k!!!  

So now we owe $22k in taxes.... because of the recapture after 14 years of depreciation...aaagh!  

I could swear I'd heard it on some real estate podcast (of course not BP) or something, that one of the great things about real estate investing was that you could depreciate your property, and even if you had a gain on the property, you didn't have to pay that back.  I guess all the properties I've sold for myself, I've either done a 1031 or sold it after just a few years, thus not paying much attention to a minimal amount of recaaaaapture.

I wish someone would tell me, 'NO you're right!  depreciation just goes away'    anybody ok with lying to me?  might make me feel better for a little while till I get the checkbook out.

[Natalie Kolodij]

It's important to note too...

That the IRS makes you recapture depreciation even if you didn't take it. That's your fault for missing that deduction. So it's not something you have a choice in. Just...fyi.