How do you handle sold Business Asset "profit" when filing taxes?

[AndPhoton]

I sold several business assets last year, and due to depreciation in previous years, made a small "profit" on the sale that is being reported and taxed on Form 4797

Here is the clincher, in Quickbooks Self-Employed, the sale is essentially listed as income, so I am already paying taxes on it. (I have them listed as a positive "expense" so you could say they are reducing my expenses rather than raising my income).

How do I avoid paying taxes twice?

[Cynthiad66 · Accepted solution]

The correct way to report the sale of business assets is to compute the sale separately from expenses.  You deduct expenses as expenses, full amount.  

When selling a business asset:

1. Yes - Edit the item as sold/disposed in the Asset Summary list, BUT
2. No - You do not need to include the sale price as income elsewhere.

Just enter the information on the sale and TurboTax will calculate any gain/loss and include it on Form 4797 for your business.

Expenses should be deducted separate from the sale of asset unless a sales expense.

[AndPhoton]

@Cynthiad66  Thank you, That makes sense. How should I handle the sale on the Quickbooks Self-Employed side? Mark it as personal so it doesn't show up under business expenses?

I wish I had asked this question earlier as I sold assets in 2020. Live and learn I guess...

Thanks again.

[Cynthiad66]

Honestly, it should be treated the same.  Quickbooks is not reported to the IRS but the information from Quickbooks is used to deduct your expenses and report your income, in most cases.  This information is for your own records so update them to imitate the tax return information.

[AndPhoton]

@Cynthiad66 Could you expound on what you mean by "they should be treated the same?"

[AndPhoton]

Oh, I guess you mean "don't include it as business income in Quickbooks the same as the tax return". Thank you!

[KrisD15]

Yes, 

actually income from depreciation recapture is reported as "personal income" so you don't pay Self-Employment tax on it. 

If you enter the sale of business property in TurboTax, the income from the depreciation recapture will flow to your 1040.