Get your taxes done using TurboTax

Your questions are answered below.

1. Depreciation Recapture: This includes the depreciation on the main house, the capital improvements that were listed on depreciation as well.  Any remaining amortization of refinance costs will be deducted in the year of sale.  Gain is taxed at a maximum of 25% capital gains rate to the extent the gain is at least as much as the depreciation expensed on your returns. Any gain above the depreciation amounts will be taxed at the regular capital gains rates.
   • The car, if it remains in your possession, but no longer used for business will simply be marked as disposed of and 'Yes' it was converted to personal use.  If you sell (includes trade in) the car later the depreciation or depreciation portion of the standard mileage rate will be factored in at that time.
2. Any passive loss that has been carried forward for your rental will be deducted in the year of sale.  When the property is disposed of these losses are used.  Be sure your carryforward loss is in your tax return.  It will reduce your income from all sources in the year of sale, but entered as an expense on your Schedule E from the 8582, automatically in TurboTax.

The sale of rental  assets is a simple process but an example of how to allocate the selling price to all of your assets, including land and then entry procedures are shown below.

The selling price should be prorated for each asset then entered for each asset when you indicate they were sold or disposed of. You will not lose the remaining depreciation because you will use the remaining basis against the selling price to determine gain or loss. 

To figure out the selling price for each asset:

1. Take the current basis of each asset against the total combined basis of all of your assets to figure out the sales price for each one; OR 
2. Determine a fair market value for each asset against the total value of all assets to figure out the sale price for each one. 

Use the original cost of each asset listed on depreciation, add those together then divide each one by the combined total to find the percentage of the cost for each asset.  Use that percentage times the sales price and sales expenses to find the selling price/sales expenses for each asset. (Choices would also be fair market value on the date of the sale or adjusted basis on the date of the sale, which is cost less depreciation.)

Example:  Original Cost (of each asset on your depreciation schedule)

$10,000 Land                = 13.33% 

$50,000 House              = 66.67%

$15,000 Improvements  = 20%

$75,000 Total                 = 100%

Multiply each percentage times the sales price/sales expenses to arrive at each individual sales price/sales expense.

I hope this example provides clarification to enter your sale.  You need to dispose of the property by telling TurboTax how and when it was disposed of.  Follow the instructions below.

1. Click on Wages and Income
2. Scroll to Rental properties and royalties, click Edit/Add or Start/Revisit
3. Do you want to review your rental?, click Yes
4. Under Rent and Royalty Summary, click Edit
5. Click Update to the right of Assets/Depreciation.
6. Do you want to go directly to your asset summary?, click Yes and Continue
7. Click Edit to the right of each asset to be disposed of/sold
8. Go through several screens until you get to Tell Us More About This Rental Asset
9. Click on This item was sold…….   And continue to answer the questions

You might also review information here.