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Old 04-06-2013, 11:37 PM
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Rental residential depreciation

I have not been depreciating my rental home on my taxes. I file a schedule E and expenses but not the home. Can I start to depreciate it for 2012 for the 27.5 yrs? What is my start date? Do I start in 2012. Date of service for using at a rental was > 5 years.
thanks for any suggestions or help in advance



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Old 04-07-2013, 10:50 AM
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“I have not been depreciating my rental home on my taxes. I file a schedule E and expenses but not the home.”==============>Even if you have NOT taken depreciation previously, you will have to figure out the depreciation you SHOULD have taken, and recapture that on sale as ordinary income. When you sell the rental property, you must decrease the basis by the amount of depreciation you actually took or could have taken on your tax returns. So even if you choose not to take the depreciation each year on your tax return, you must decrease the cost basis at the time of sale assuming you took it. So there is no benefit at the time of sale of not having taking the depreciation each year.
NOTE: Be sure to depreciate your rental property because the IRS assumes that you take it! If you don't take the depreciation, you will have to pay taxes on the property when you sell it through depreciation recapture taxed at 25% max. as long as your marginal tax rate is 25% or higher.
“ Can I start to depreciate it for 2012 for the 27.5 yrs?”=======No; for rental property placed in service after December 31, 1986 the depreciation cost is recovered over 27.5 years. Only the cost of the structure is allowed as a depreciation deduction; the value of land cannot be depreciated.
“What is my start date?”======When the rental pty was placed in service.
“Do I start in 2012.”==No; your start date is the year>5 years. You begin to depreciate rental property when it is available for rent to tenants.
“Date of service for using at a rental was > 5 years. “=======As said above.



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Old 04-07-2013, 04:13 PM
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Thanks and a couple more questions for clarity. I am not selling and will maintain rental status. I'll start the depreciation from the year 2002.
#1. Do I or can I back date the depreciation of the last 10 years or is that lost.?
#2. YOu said "you will have to figure out the depreciation you SHOULD have taken, and recapture that on sale as ordinary income." but I am NOT selling. Do I still figure out the figure and claim? I guess that is #1's inquiry.
Thanks again.



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Old 04-07-2013, 04:41 PM
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“#1. Do I or can I back date the depreciation of the last 10 years or is that lost.?”=========as you forgot to take depreciation in prior tax years, you must amend your tax returns. Depreciation must be claimed in the years you are entitled to take it under federal law or you lose it. In general, you are only allowed to file an amended returns to correct your depreciation amount if any of the following applies: you claimed the incorrect amount because of a mathematical error made in any year; you claimed the incorrect amount because of a posting error made in any year; you have not adopted a method of accounting for property placed in service by you in tax years ending after Dec. 29, 2003; or you claimed the incorrect amount on property placed in service by you in tax years prior to Dec. 30, 2003. If you forgot to take depreciation in prior years, you would fall within the third category of individuals who would be able to file an amended returns.However, for your refund claims, must file a claim for a tax refund by the later of three years from the date you file the tax return or within two years of paying the tax. If you do not make the claim within this time frame, the IRS has the authority to reject the refund request.For example, if the original due date was April 15, 2011 for tax year 2010, you would have three years, until April 15, 2014, to file a tax return and claim a refund. The IRS does not levy a late filing penalty when you did not have an obligation to file and is only filing to claim a refund.So you can claim your refunds on 2010/2011/2012 returns as long as you are subject to tax refunds due to past depre claims.


#2. YOu said "you will have to figure out the depreciation you SHOULD have taken, and recapture that on sale as ordinary income." but I am NOT selling. Do I still figure out the figure and claim? I guess that is #1's inquiry==========yes;you only need to recapture unrecap depre on the disposition of the rental pty;as mentioned previously, you need to file amended returns to claim your past depre not taken previously on your returns.



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Old 05-23-2013, 01:55 AM
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Thank you for sharing this thread as it really have the specious information and just help us to find the right deals.



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