I currently have 2 single family homes which I have been renting (and reporting as such to the IRS) for the last 8 years. I understand the gain from the sale is counted as regular income and I hear that I must also add back the depreciation amts. claimed. Are all depreciation $ from past years counted as regular income as well? Is the gain computed from the amt the home was worth at the time it was put into rental service or the amount paid for the home (since I lived in it for 4 years prior to renting out)?
Is there any way to lower the tax burden since it will not be a like kind transaction, although the funds will be used to buy a vacation home which could possibly be rented out in off season?