Very helpful as I have just done tax work on clients that sold rental property. I was shocked at how much they had to pay and was thinking something wasn't right. Great channel.
I'm glad you found the video helpful. It can be hard telling clients who sell rental property for less than they paid for it that they actually end up with a gain.
How do you take the carryover schedule E rental losses against the capital gains of the sale of the rental property? My software continued to show an unallowed loss.
Actually, the carry forward losses don't directly offset the capital gain. Instead, the carry forward losses can be taken in full when the property is disposed of. I don't know how your software works, when you're entering information for the final Schedule E on the property, there should be a way to indicate that it's a "final disposition." if it's a vacation property that's used for both rental and personal use, any carry forward losses are unfortunately lost when the property is disposed of.
@@TheTaxGeek It may be an issue with my software... I'm going to try a different one. I have used CashApp for the last couple of years which seemed to work fine previously. I have just sold a short term rental property. It was purchased with the intent of using it as more of a vacation property, but my husband's job changed so we never used it for personal use. Through the CashApp software I have specified the disposition date but only in the depreciation section. It seems like it's not transferring through to the schedule E that the property was sold and taking the suspended losses. I tried contacting their customer service and they replied with "taxes can be complicated, you should hire a professional". Well a professional already told me that I can deduct these suspended losses now that I've sold the property, but I can't get the software to recognize it appropriately.
line 26 of 4797 says, "If section 1250 property: If straight line depreciation was used, enter -0- on line 26g..." Seems the marginal tax rate only applies to the difference of a higher depreciation method minus the straight-line amount of depreciation. Isn't Christine (the example case) paying more tax than required? thanks
What you're looking at really only applies to real property placed in service before 1986, when accelerated depreciation was allowed for real property under ACRS depreciation. For all intents and purposes, you can no longer take depreciation in excess of straight-line under MACRS. Since "Christine" depreciated her property using straight line MACRS, her depreciation recapture (the unrecovered Sec. 1250 gain) is taxed at her marginal rate or 25%, whichever is lower. Any excess gain would be taxed at long term capital gains rates. ACRS depreciation is what I call a "tax fossil"--a part of the tax code that remains in the code, but no longer applies to anyone.
