Depreciation recapture when selling primary residense

Forum|Forum|11 months ago
April 7, 2025
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Hi, I plan to sell my primary residence which I first lived there for 5+ years, rented for 4 months and then I live there for another 2 years, I understand we need to recapture depreciation in the capital gain when selling, no matter the depreciation will be used to deduct my rent income or not, as other expenses may cover the full rent income.

My question is, does the recapture depreciation only account for the 4 months rental period or include my personal usage for 2 years afterwards? I don't think it's fair to recapture for personal usage period.

What if I do short term rentals occasionally and I converted to personal usage between them? How do we calculate the depreciation when selling?

TurboTax Premier Online

PatriciaV

You would report only the depreciation expense you actually claimed while the property was used as a rental. There is no depreciation for personal use.

If the short-term rentals were 14 days or less, you wouldn't report that income or deduct any expenses.

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hno4Author

Got it thanks, to clarify, if I rent for 4 months, then personal usage for 1 year and rent for another 4 months, the depreciation will restart to accumulate for my 2nd rental, as it should not include my personal use between 2 rentals? let me know if I understand correctly.

AmeliesUncle

@hno4 wrote:
Got it thanks, to clarify, if I rent for 4 months, then personal usage for 1 year and rent for another 4 months, the depreciation will restart to accumulate for my 2nd rental, as it should not include my personal use between 2 rentals? let me know if I understand correctly.

Yes.

However, can I ask why it is being rented for 4 months on-and-off? The point I'm getting at is "Nonqualified Use" when you sell. Generally, when you use the home for your Principal Residence AFTER it is not your Principal Residence (such as renting it out), that triggers "Nonqualified Use" (although there are exceptions, which is why I asked why are you renting it out).

The problem with Nonqualified Use is that your $250,000/$500,000 Principal Residence exclusion is prorated when you sell. A severely simplified version is let's say you own the house for exactly 10 years and it was rented exactly 1 years (and you used the home as your Principal Residence AFTER it was rented). In that example, 1/10th (10%) of the profit would not qualify for the tax-free exclusion (in addition to the tax from the gain due to depreciation).