"Allowed and allowable" depreciation when selling rental home We owned another home we rented to our daughter for 4 years. After 2 years we changed it to rented not for profit as it was rented far below fair market value. For the first 2 years we used Schedule E. However, we were never able to claim a loss due to our income being higher than 150000. Therefore, our expenses were only allowed up to the amount we received in rents. This amount just covered the mortgage interest and real estate taxes. Depreciation was not allowed. Does this mean I do not have to recapture the depreciation when reporting the sale of the home in 2014 as it was not allowed and allowable for these 2 years? The same thing happened in the third year even though I followed the instructions for Rented Not for Profit. I found a section in Pub 523 page 16 under How to Figure your Taxable Gain or Loss Worksheet question 3a that states "If you have good records to show the IRS did not allow you to take that much depreciation , total the amount you were actually allowed to take." This would mean only the depreciation I will take this year would have to be recaptured. Am I correct? These returns I am referring to are all after 1997. |