Investors & landlords

The answers to your questions are listed below in the order you asked them.  

1. Do I need to go into all the depreciable assets for the rental property I sold and close them out by stating YES to ..."Did you stop using this asset in 2023?"   I ask this because some of the assets are old and the depreciation is 0.  
   1. Yes, you do need to mark each asset sold, if you had no sales price for some assets you can enter zero as the selling price and selling expense (example might be appliances).
2. One asset that is still getting depreciation is SIDING...that was put on at a cost of 10K
   1. Every asset needs to be marked as sold.  You must prorate the selling price and selling expenses based on the percentage appropriate for each asset. See example later. There should be no 'Special Handling' selected.
3. Sale of home questions: TurboTax asks about this because sometimes a rental is converted to a home and then sold.  You should answer no this was not part of you home sale.
4. The selling price for the siding is not zero.  See how to prorate the selling price and selling expenses below.
5. The type of property is Section 1250 for the main house, any capital improvement that is part of the house such as the siding. Section 1245 property is any appliance or asset that is not part of the rental home itself if you have any.

The remaining cost basis in the siding is used to reduce your overall gain.  It does have a sales price as noted below.

Use the original cost of each asset listed on depreciation, add those together then divide each one by the combined total to find the percentage of the cost for each asset.  Use that percentage times the sales price and sales expenses to find the selling price/sales expenses for each asset. (Choices would also be fair market value on the date of the sale or adjusted basis on the date of the sale, which is cost less depreciation.)

Example:  Original Cost (of each asset on your depreciation schedule)

$10,000 Land                = 13.33% 

$50,000 House              = 66.67%

$15,000 Improvements  = 20%

$75,000 Total                 = 100%

Multiply each percentage times the sales price/sales expenses to arrive at each individual sales price/sales expense.

You need to dispose of the property (and each asset) by telling TurboTax how and when it was disposed of.  Follow the instructions below.

1. Click on Wages & Expenses
2. Scroll to Rental properties and royalties, click Edit/Add or Start/Revisit
3. Do you want to review your rental?, click Yes
4. Under Rent and Royalty Summary, click Edit
5. Click Update to the right of Assets/Depreciation.
6. Do you want to go directly to your asset summary?, click Yes and Continue
7. Click Edit to the right of each asset to be disposed of/sold
8. Go through several screens until you get to Tell Us More About This Rental Asset
9. Click on This item was sold…….   And continue to answer the questions

You might also review information here.