1. Gain = Sales Proceed - Cost Basis.
Cost Basis = purchase price + cost of purchase + all improvements
Sales Proceed = sale price - cost of sale.
Therefore:
Gain = sale price - cost of sae - purchase price - cost of purchase - all improvements.
This gain is subject to capital gain tax. which is 0%, 15% or 20% depend on your total income that year. Usually when you sold a home for $X00K, you would be in the 20% rate that year anyway.
2. Depreciation Basis
Depreciation Basis is the aquisition cost of a property. Depreciation basis for a home is the value of the structure (not including land). Depreciation basis for a new roof is the cost of replacment of the roof.
Depreciation basis would not change once depreciation starts. Therefore every year you would have the basis/depreciation schedule of years and have a constant deprecation, unless you added new property to depreciate that year.
3. Depreciation Schedule
A home strucuture (including a new roof) is 27.5 years straight line depreciation. New applicances might be depreciated over 5 or 7 years, check IRS website: Therefore:
4. annual depreciation = strucutre value / 27.5 + new roof value / 27.5 + other new improvement or new appliance / (schedule of depreciation)
5. Depreciation recapture
When you sell your house, other than calculating gains like in 1) All the depreciation 4 you claimed every year have to be added up, e.g. 2020, $3500; 2021, $3500... $2024, $4000 (because new roof started another depreciation)....
and the depreciation recapture is taxed as your income rate, but no higher than 25%.
