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Updated over 7 years ago,
Depreciation - paying back after sale of a rental?
I am trying to understand how much depreciation I will have to pay back to the IRS if I sell my single family rental home that has been a rental for 5 years. Is it the full cash amount I depreciated or the amount of depreciation multiplied by my effective federal tax rate? Hoping someone can help! For example, I'll use these approximate numbers to explain:
Cost basis of building: $135K
Depreciation; $6K per year
Period of Use as a rental: 5 years
Total Depreciation: $30K
If I sell it now at a profit and my effective federal tax rate in the year of sale is 20%, what do I owe the IRS for depreciation? $30K OR $30K x 0.20 = $6K ?
Any replies would be appreciated!