Updated almost 8 years ago on . Most recent reply
depreciation recapture when selling rental SFR
I can't deduct depreciation of rental SFR as I does not qualify as "active" real estate investor because I have full time day job and SFR rental is only part-time.
When I sell this rental SFR, I recapture depreciation which lowers my cost basis and increase my total gain and so increases my tax? Doesn't make sense as depreciation didn't lower my taxes to begin with. Is recapture my enemy because I am not "active" participatent in real estate?
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#3 Real Estate Deal Analysis & Advice Contributor
- Rental Property Investor
- Mercer Island, WA
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#3 Real Estate Deal Analysis & Advice Contributor
- Rental Property Investor
- Mercer Island, WA
A real estate license does not make your a real estate professional for the IRS. To be an RE pro you must spend at least 750 hours a year on real estate activities OR more hours than you spend on any other job. That's basically 15 hours a week. If your wife does 15 hours a week, you can use that to take more passive losses than allowed by the special allowance. A RE license is irrelevant.