New landlord here renting out what was our primary residence while living abroad for two years. When we return to the states we have no set plans whether we will move back into that place, buy or rent a different one and keep house #1 rented out or sell it. So, lots of variables and flexibility, and understanding depreciation and recapture will help form our plan going forward. We are currently low income at least until our two toddlers start school, and if we can make the numbers work, we might continue to be low income after moving home.
Self-employed Gross take-home $30k
Rental gross $24k with about $12k written off. No major expenses expected (updated with new appliances, new roof, new septic). Cash flows +$500 per month.
When I filed 2018 taxes I followed depreciation tables, not understanding we would have to pay income tax on that recapture someday. The question is, we are so low income right now, and don't know if we will continue to be when we might sell someday, so would we be wiser not to depreciate? I guess I don't understand how depreciation works out as very beneficial for anyone unless they never intend to sell...I must be missing something?!
I think I understand the capital gains rules and we'll definitely keep those in mind when deciding how to proceed.
Somewhat unrelated, but we are also trying to wrap our heads around the Foreign Earned Income Exclusion and EITC, as they are mutually exclusive. Basically, there are a few different avenues we can take that result in paying very little, if any, taxes while living abroad and low income.