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Level 4
October 3, 2025
Solved

Where is depreciation capture reported?

  • October 3, 2025
  • 3 replies
  • 13 views

My client used his home for business. I have calculated the depreciation recapture amount on Form 4797 line 7. The rest of the home sale gain is excluded. Where does that number get factored into the tax calculation. I understand its taxed at 25%. Does it flow to another Form?

Best answer by TaxGuyBill

If it is showing up on line 19 of Schedule D, you should be good.

3 replies

sjrcpa
Level 15
October 3, 2025

Why use the 4797?

Why not use the home sale worksheet and enter the depreciation there?

The more I know the more I don’t know.
freshy70Author
Level 4
October 3, 2025

Not sure how to do that. I just reported the asset sale on the disposition screen from depreciation and form 4797 generates. Is there some other way I'm supposed to do this?

I did notice after my original post that this diagnostic triggered: "Depreciation asset #1: Sale of Home Worksheet - Gain or (Loss), Exclusion and Taxable Gain were not completed because the home was used for business in the year of the sale. See Publication 523 for more information. US - Ref #2008379"

 

 

 

sjrcpa
Level 15
October 3, 2025

I would skip "the asset sale on the disposition screen from depreciation".

Enter the sale where you enter a home sale/stock sale, etc.

But that's me.

The more I know the more I don’t know.
Level 15
October 3, 2025

If it is showing up on line 19 of Schedule D, you should be good.

freshy70Author
Level 4
October 4, 2025

Thanks for everyone's input. Ultimately the reason why this was not showing up on line 19 of Schedule D is because on line 16 there was a capital loss. So the depreciation recapture amount just reduced the capital loss rather than showing up on line 19. The net capital loss on line 15 reduced from $1,238,510 to $1,231,611 resulting in a $3k loss for the year. 

So doing this disposition from the depreciation screen works, it's just that it will only show up on Line 19 if there is no net capital loss coming from line 16.

Accountant-Man
Level 13
October 6, 2025

If the home office was 10% of the total home, then 10% of the total gain would not be excluded.

The Home Sale w/s should handle this.

** I'm still a champion... of the world! Even without The Lounge.
Level 3
November 28, 2025

Depreciation recapture from a home used for business (Form 4797, line 7) is taxed at up to 25% and flows to Schedule 1 (Form 1040) as ordinary income, even if the rest of the gain is excluded.

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