To report the sale of a personal residence converted to a rental, you will need to know your original basis and the total depreciation you've taken while the property was reported as a rental.
The basis for real property is the total of:
- Acquisition Cost (purchase price, or cash plus assumed mortgage)
- Settlement Fees (closing costs)
- Additions/Improvements
If you are unable to locate the closing documents for the original purchase, you will need to estimate your purchase cost and closing fees. A search of property tax records may help you confirm the purchase price. Most county tax offices have an online search capability that goes back at least 20 years. Contact your county clerk's office for more assistance.
A local Realtor should be able to estimate your closing costs based the selling price. If you made any major improvements either before or after you converted the property to a rental, you should have some records of those expenses.
Look for worksheets and forms in your tax returns from this period. Some of this information (like accumulated depreciation) should be included in your tax records.
Keep good records from the resources you use to determine your basis for the sale. You must be able to document your numbers if the IRS decides to take a closer look.
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