Investors & landlords

You don't enter in the rental section. You have to refigure your basis for main home sold. You have 21 years of depreciation to account for in the sale. You are not allowed to include gain from depreciation taken. You must reduce your basis in the house by the amount of depreciation taken. On the flip side, any passive losses that were not allowed can be added back in. If your income is over $150,000, you could not claim losses for those years.

Follow these steps:

1. Determine depreciation taken and passive losses unallowed

• Go back to your 2020 return to see how much depreciation you took over the years. Write that down.
• On your 2020 return, look for a passive loss carryover. Hopefully you have been tracking it through the years.
• Go back through  all tax returns and look for the passive losses if you didn't track them.
• If you were subject to AMT, you will need to determine AMT depreciation as well. 

2. Determine your original basis

Go back to your 1999 return and see how much you claimed for house value to depreciate vs land value. Did you use lower of cost basis (purchase plus improvements) or FMV? If you used FMV since it was lower, restore your original basis instead of using the reduced numbers. 

3. Determine allowable closing costs from the sale, property tax, commissions, etc.

4. Determine new basis for house

Take original basis + unallowed losses. 

The depreciation will be a separate input in the program

The closing costs allowed will go into the program as selling expenses and is defined in the program.

5. Input as sale of main home since it wasn't rented last year.

1. Federal income
2. Sale of Home
3. Start
4. Main home
5. Yes
6. Address
7. Continue
8. 1099S, select yes or no
9. Enter date sold
10. Selling price
11. Sales expenses
12. Continue
13. Date bought
14. Adjusted basis - your home minus depreciation taken
15. Did you live in home at least 2 years
16. Select yes or no
17. Other than primary home
18. Yes
19. Days used for other purposes
20. Sell another home within 2 years of date sold?
21. Yes or No
22. Depreciation after 1997
23. Yes
24. Enter depreciation allowed, if you never had AMT, use the same number for AMT depreciation
25. Continue

Remember to keep all records of a house rental from purchase to sale plus 3 years.

@VinceThai