Originally Posted by mytaxes2013
#1;We moved back into our home in July 2013. Although we had depreciation on the rental, we could not take it due to our high tax bracket.
#2;Can we now claim the depreciation we could not claim last 2 years due to change in status?
#1;you couldn’t take depre on the rental home due to high tax bracket???? What do you mean by this????? You recover the cost of rental home through yearly tax deductions. You do this by depreciating the home; that is, by deducting some of the cost each year on your tax return.Taking depre has nothing to do with your high tax bracket.But it has something to do with the rental income generated from the rental home. You can begin depreciating the value of the entire rental property as soon as the rental home is ready for tenants, even if you don’t yet have any. . You’ll have to stop depreciating once you recover your cost or you stop renting out the home, whichever comes first.HOWEVER, you can’t take depre on yur rental home UNLESS you have rental income; you offset that income, and lower your tax bill, by deducting your rental home expenses including depreciation aslongas the offset is also available on depre taken.
It does not make sense to skip a depreciation deduction because the IRS imputes depreciation, meaning that even if you don't claim the depreciation against your property, the IRS still considers the home's basis reduced by the unclaimed annual depreciation. If your total rental expenses exceed your rental income, the annual deprec of your home does nothing to reduce your taxes. This creates a scenario where it seems to make sense to skip depreciation, so that you have a higher tax basis for the future sale of your property.
#2;Can we now claim the depreciation we could not claim last 2 years due to change in status?=========Asyou forgot to take depreciation in prior tax years, you must amend your tax returns;
you need to amend your Sch E OF 1040/1040 using 1040x Along with any other schedule that may contain the error. Unless you are a r/e pro, your rentals are considered passive activity income, and you can only offset PAL with passive gains. Depre must be claimed in the year you are entitled to take it under federal law or you lose it. In general, you are only allowed to file an amended return to correct your depreciation amount as you have not adopted a method of accounting for property placed in service by you in tax years ending after Dec. 29, 2003; so you forgot to take depreciation in prior years, you would be able to file amended returns.remember; Be aware that you have three years to make any corrections that result in additional tax refunds. That's because there's a three-year statute of limitations on issuing tax refund checks. This 3year period is measured from the date you filed your original tax return. If you filed your return before Apr15th, the 3year period begins from Apr 15th. If you requested an extension, the three-year period runs from October 15