re: Tax question on a home sale - ordinary income vs capital gains

quote:

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Its subtracted at basis of home sale and then again at LTCG?

what am i missing?

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Sorry, I could have been more clear.

At the LTCG line, I'm simply trying to show that of the total gain of 65K, since 30K is taxed as depreciation recapture, then 35K is taxed as long term capital gain.

In other words, once you determine your total gain, you have to allocate that gain first to the amount of deprecaition taken, and then any remaining gain gets the LTCG treatment.

Think of it this way. Depreciation reduces your basis. Gain is the difference between net proceeds and adjusted basis. Hopefully, your net purchase price appreciated beyond the original historical cost.

So the part of the gain that occurs because your basis went down due to depreciation is the depreciation recapture.

The part of your gain that occurs because your net proceeds exceeds historical cost + imprvements, i.e. your value appreciation, is taxed as a LTCG.