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@TaxGuyBill wrote:

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@Just-Lisa-Now- wrote:

If they happen to sell the rental (I dont think they will) the depreciation hasn't been giving them any tax benefit (even without the depreciation they still wouldn't have any taxable income) so would it still be subject to recapture if they sell?

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Yes (well, it is actually "Unrecaptured Section 1250 Gain").  The depreciation still lowers their Basis in the property, so their gain will be higher due to the depreciation, and is subject to the normal Unrecaptured Section 1250 Gain rules.

But as you implied, if they are retired, they may consider holding on the property until they die to receive the step-up in Basis.

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They got dinged hard a few years ago selling a different rental (and inflated their medicare costs too!), I know they are not planning to sell this other one unless some kind of life situation made it the only option.