Hello!
You are correct. You will be paying Taxes based on the gain on the sale.
You are correct that you are able to deduct the Capital Losses accumulated and carried over from prior years.
Limitations would be normal Capital Gains/Capital Loss netting rules for Income Tax.
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.
After the entries are made you should not only have a Schedule E reporting the Rental activity, but now you will have a Schedule D reporting the Capital Gain/Loss.
One thing that I would like to add here is that there is an element of depreciation recapture for depreciation deductions taken during the rental periods. Often times my clients “forget” the impact these deductions will have on the Tax calculations. Depreciation recapture is reported ordinary income rather than as capital gains, which is taxed at a lower rate, the difference between the sale price and adjusted cost basis is “recaptured.”
Let us know if you need more guidance. We stand ready to assist you!
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