How to calculate depreciation the second time around

How to calculate depreciation the second time around

Real Estate Investor · Seattle, WA · Member since 2015 · 9 posts · 5 votes

Hello! I purchased a property as my primary residence in 2006, converted it to an investment property in 2009, and then moved back into it in 2016. If I convert it back into an investment property, how do I calculate the depreciation when I start putting it back on my Schedule E? Do I continue the old/original depreciation schedule or somehow recalculate it? I read one post that suggested that I would need to go back and amend my 2016 taxes to recapture the depreciation at the time I had moved back into the house (!)

I also have a question about capital gains, since we might have to sell the house at some point in the next year or two. The house was under water for most of the years it was a rental, and only started being above water again within a year or so of the time I moved back into it in 2016. Is there some way that I can provide that evidence rather than the capital gains being averaged out on an annual basis from the time that I bought the house originally? 

Thanks!

0Reply
27 views

3 Replies

Jump to latestLatest
  • Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
    7y

    Do you have a CPA that has  prepared your  returns and that is familiar with your scenario ....if so - they would likely be the best source of information 

  • Real Estate Investor · Seattle, WA · Member since 2015 · 9 posts · 5 votes
    7y

    Dave, 

    I'm asking here because my preference for a multitude of reasons is to file on my own, obviously :) and I accurately described my situation in my query, but if anyone who can help me needs further information, I'm happy to provide it as well. 

  • Dominick AustriaBusiness Member
    Accountant · Las Vegas · Member since 2019 · 51 posts · 21 votes
    7y

    I don't believe you'd have to amend your 2016 taxes to recapture the depreciation. If you want to rent it out again, I would continue the old depreciation on the property. This may not be the case if the FMV is less than your previous basis. Also the irs requires you to allocate between qualified and non qualified use period for cap gains. You will have depreciation recapture when you sale your house. Your situation has a lot of moving part. Hope you are able to accomplish your goals!

    Intent CPA Solutions, LLC525 Reviews
Join the conversationCreate a free account to reply, vote on answers and follow this thread.