PatriciaV
Expert Alumni

Get your taxes done using TurboTax

Yes, this is a complicated situation with many moving parts.

 

1. You have not reported the sales expenses correctly. Only the closing costs are considered Selling Expenses. Paying off the mortgage is not a tax-related transaction (any loan interest you paid is reported under Rental Expenses). Also, the pro-rated property taxes are reported as Rental Expenses, and not part of the sale.

 

2. Revisit the "Special Handling Required" page and read any blue hyperlinks that may help you answer this question accurately. If you converted this from personal to rental use, special handling may be required. Likewise with the Business Use Percentage questions - the blue hyperlinks may be helpful.

 

3. Allocate the sales proceeds to the building and the land based on your Cost Basis for those assets, not the current fair market value (assessment). Unless you made significant improvements to the land, it's unlikely your basis has changed since you converted the property to rental use.

 

4. You have a choice on how to handle the sale of the remaining assets. You can either allocate the sale price to them as part of the entire sale, again based on Cost Basis after depreciation, or report them as disposed of without a sales price.

 

After you have made these changes, reviewed the entire Rental Property section again, and see how this sale affects your tax situation, if you still feel you need more help, please consider using TurboTax Live. This service allows a tax expert to review your entries, share your screen if necessary, and provides some confidence that you have reported this sale as best you can.

 

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