I have a second home that I inherited in late 2013, and which I've been renting out as an AirBnB type rental since 2015. I (my CPA) has been taking depreciation on the home since 2015 against gross profits, Schd. E. The home has doubled in market value since late 2013. I'm thinking about selling the home.
In general, how does depreciation play into capital gains upon sale of a second home used for income?
Yes, I will ask my CPA, too.
Depreciation recapture occurs when you sell a property and get money back from the sale that you either did or could have deducted as depreciation. When that happens the recaptured amount is taxed as ordinary income, not capital gain.
Yes, dividend recapture is taxed at ordinary income, but capped at a 25% rate. The rest of the gain is a long term cap gain. "Since 2015" means the $250/500k exemption for selling an owner occupied home is not applicable. (and may not have been applicable anyway, depending on the time spent there).
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