Sale of qualified residence that was rented out for 1.5 yrs

[Greta]

Primary residence for over 2 yrs, then rented out for 1.5 yrs. On Sch D forgiven profit is $70K. How to report depreciation taken for 1.5 yrs (under $5K)?

[jofijohnjoseph · Accepted solution]

You will still report the sale on your Asset Entry Worksheet where you were recording depreciation expense for the property.  That will automatically calculate the depreciation recapture tax on Form 4797.  

On this same worksheet, you will double click to link the sale to your Home Sale Worksheet, where you can claim the Primary Residence exclusion.  That will allow you to exempt the capital gains from taxation while still accounting for depreciation recapture tax.