When you sell your rental building, you have to indicate the sale in TurboTax and also indicate that each asset is also sold. TurboTax will walk you through the sale of each asset. You would apportion your sales price to each asset (building and assets, i.e. roof). TurboTax will calculate a gain or loss on each asset. Also, TurboTax will also factor in Depreciation Recapture.
- Depreciation expense is an item that landlords may not know about and the fact that when you sell your rental, you have to claim all the previous years’ depreciation expense. This is called Depreciation Recapture and it's taxed in the year of sale. You may have to pay 25% on your depreciation recapture. See IRS Publication 544 Chapter 3 Depreciation Recapture, page 27.
A roof is a capital improvement that adds to the value of your rental property, prolonging its life, and must be depreciated over 27.5 years rather than deducted as a current-year expense.
To enter your roof as a rental asset:
- Sign into your TurboTax account.
- Select Pick up where I left off or Continue.
- Select Federal then Wages & Income from the left side menu.
- On the Your income screen, scroll down to Rental Properties and Royalties (Sch E) and Edit/Add.
- If you get to the Your 2022 rentals and royalties summary screen, Edit the property.
- On the Here's XXX rental property info screen, scroll down to Assets. If you have other that are listed select Edit.
- On the Your improvements, furnishings, and other assets screen, select Add Asset.
- On the Your Property Assets screen, scroll down and select +Add an Asset.
- On the Describe This Asset screen. select Rental Real Estate Property and Continue.
- On the Tell Us About This Rental Asset screen, select Residential Rental Real Estate and Continue.
- Enter the roof information and Continue with the onscreen interview until complete.
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