Hello!
You are correct. You will be paying Taxes based on any gain on the sale. The actual tax calculations normally result in two different types of taxes. The first type we generally think of in this situation is Capital Gains Tax (at a lower rate than Ordinary Income Tax rate). The second is Ordinary Income taxes on any Deprecation Recapture.
After the entries are made you should not only have a Schedule E reporting the Rental activity, but now you will have a Form 4797 reporting the Capital Gain/Loss. https://www.irs.gov/forms-pubs/about-form-4797
Just follow the TurboTax interview questions when reporting the rental property activity for the year follow the steps listed:
Follow these steps to report the sale of your rental property on your tax return:
- With your return open in TurboTax, search for rentals and then select the Jump to link in the search result.
- Answer Yes to the question Did you have any income from rentals or royalties?
- When you get to What are you here to report? select Rental property and fill out the description, address, and owner.
- When you hit Tell us about your situation this year check the Sold or disposed of property box along with any other boxes that may apply.
- Continue following the onscreen prompts to enter info about your rental property.
- Eventually, you'll get to the Review your rental property info screen. On the following screens, we'll ask you to enter all the info we need about your rental property.
- You can report the sale in the Expenses/Assets (Depreciation) section, along with any other pertinent info (like income and expenses)
Tip: Take your time and pay close attention. There's a lot of info and it's easy to miss if you're in a hurry.
Let us know if you need more guidance. We stand ready to assist you!
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