Depreciation Recapture on Rental Property

Forum|Forum|2 months ago
April 15, 2026
1 reply
6 views

Taxpayer had a rental property that was placed in service in fall 2018 and rented continuously through fall 2024. The taxes were self-prepared, and no depreciation was ever claimed during the rental period.

In fall 2024, the tenant caused significant damage, and the property became uninhabitable. It remained vacant for all of 2025 while repairs were being made. The property was listed for sale in January 2025 and ultimately sold in September 2025. There was no rental income in 2025.

My questions:

For 2025, is a Schedule E still required even though there was no rental income?
Since no depreciation was ever taken from 2018–2024, how should depreciation recapture be handled on the sale? I understand “allowed or allowable” rules but want to confirm the proper treatment and whether a catch-up adjustment (Form 3115) is needed or if recapture is still required regardless

ProSeries Professional

T

TaxGuyBill

Level 15

@MGC94 wrote:

For 2025, is a Schedule E still required even though there was no rental income?

Since no depreciation was ever taken from 2018–2024, how should depreciation recapture be handled on the sale? I understand “allowed or allowable” rules but want to confirm the proper treatment and whether a catch-up adjustment (Form 3115) is needed or if recapture is still required regardless

1) No. But if there were any unallowed Passive Loss Carryovers, it might be easier in ProSeries to have one. Plus you could enter the Section 481(a) Adjustment there.

2). As you said, the depreciation reduces Basis (and therefore increased gain) regardless if it was actually taken or not. Use Form 3115 to 'catch up' on the missed depreciation and get the deduction for it.

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