In your situation you do need to use the actual cost basis and not fair market value (FMV) to report the sale. You can do this one of two ways.
- Add the additional amount as part of the sales expense if you are reporting the sale through the asset section (under the rental property assets). Include any sales expense, the difference between FMV and cost basis (should include purchase expenses). Depreciation will be handled by TurboTax.
- Your question: So, my gain should be selling price minus sale expenses minus taken/allowed depreciation minus purchase price minus purchase fees, right? Answer: Yes
- Indicate the property was removed from service (not sold) and record the depreciation for the prior and current year, then enter a Sale of Business Property separately outside of the rental activity (not recommended because it's not necessary).
- Keep all of your documentation with your tax return with details on how you arrived at the sales expenses if you choose option 1 (recommended).
Your Question: I can also subtract refinance fees incurred while renting it?
- The balance of the refinance fees in the year of sale are deducted as an expense for any portion that remains at the date of sale (has not been fully amortized). It is not part of the sale but rather a rental activity expense.
@AlexB_
[Edited: 03/15/2022 | 7:18a PST]
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