No Capital Gains Tax, what about Depreciation recapture

[Aaron Ingram]

BP,

I may be missing something here but i'm looking at selling my first property as it has cash flowed minimally and I have held for appreciation, which it has done. The property was not purchased as an investment initially so it's time to move on. I have about 70K equity that i would like to roll into more cash flowing assets. My question is, I lived in this property for two of the last five years so i would incur no capital gains but I think depreciation recapture from three years of rental income, with a total depreciation of around 25K, would put a good dent in my earnings. Is it worth it to take the hit on this in order to have to time and breathing room outside of 1031 or would it be better to defer and use 1031 in this case? Any advice is appreciated

[Ashish Acharya]

Originally posted by @Aaron Ingram:

BP,

I may be missing something here but i'm looking at selling my first property as it has cash flowed minimally and I have held for appreciation, which it has done. The property was not purchased as an investment initially so it's time to move on. I have about 70K equity that i would like to roll into more cash flowing assets. My question is, I lived in this property for two of the last five years so i would incur no capital gains but I think depreciation recapture from three years of rental income, with a total depreciation of around 25K, would put a good dent in my earnings. Is it worth it to take the hit on this in order to have to time and breathing room outside of 1031 or would it be better to defer and use 1031 in this case? Any advice is appreciated

Did you rent the property before you moved in or after you moved out? I ask because if you moved in after you rented it, then not all of your capital gains will be eligible for the exclusion. Only the rental after you moved out would be qualified for the exclusion.