Tax lien purchases, including the cost of the premium bid, will be treated like investment sales in TurboTax. See the details below and please update if you need further assistance.
- If the property owner has repaid the lien, minus your premium, you would enter this as an investment sale, with a category of other.
- Holding period would be the length of time you held the lien. (long term or short term)
- The interest, if applicable, would be claimed as interest income under that section of the program.
- You can just say it was reported on a 1099-INT, it doesn't matter. The interest you pay tax on, whether when the lien is redeemed or you receive it on an annual basis, is added to the cost basis of your lien purchase. If the premium is not repaid, you could claim it as a selling cost, since it's included in your cost basis.
You will report that in the same section that you report stock and other investment sales. To enter:
- Type "Investment sales" in the search window and click Enter
- Click on "Jump to Investment sales"
- On the page with "Did you sell any investments in 2021?" Answer Yes
- Answer No to "Did you get a 1099-B..."
- On the "Choose the type of investment you sold" Indicate "Other"
- The interview will walk you through entering the details of the sale
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