Landlords wise to depreciate rentals at tax time

Uncle Sam can 'recapture' amount when property is sold

DEAR BOB: I have a follow-up question to the one about renting a principal residence for three years after having occupied it as my primary home for the previous two years. Do I have to depreciate it while renting to tenants? Or can I just deduct on my income-tax returns the mortgage interest, property taxes and other rental expenses? I recall you stating in one of your articles something about the IRS requiring depreciation deductions even if it was previously the owner's principal residence. If I have to deduct the depreciation on Schedule E of my income-tax returns, I presume I must "recapture" the depreciation and pay tax at the special 25 percent rate when I sell even though I claim $500,000 tax-free profit by using Internal Revenue Code 121. Is this correct? --Charles T. DEAR CHARLES: Even if you don't deduct depreciation for a rental house while it is rented, when that property is sold the IRS will "recapture" and tax the depreciation, which should have been deduct...