Investors & landlords

Home Sale with Rental and Home Office Depreciation:

In your situation the sale should be reported as a sale of your home. This means that in the rental activity you must be sure to select in Property Info it was sold and when prompted select Special Handling (this stops TurboTax from looking for sale information in the rental). 

For both the rental and the home office you can also select that it was converted to personal use. The sale should not be reported in the rental activity or the home office. The information you need to collect for the sale of you home is noted below.

When you enter the home sale in TurboTax it will ask for a couple of items that are needed to report the sale correctly.  

1. The total depreciation expense that was allowed during the period it was available for rent, include the total depreciation used as a home office as well.  Check your prior tax returns for this figure from both the rental and the home office.
2. The total number of days the property was available for rent during the ownership period. 

Results:

1. The amount of depreciation that was allowed will be completely taxable up to the amount of gain received on the sale.
2. The remaining gain if any, will be split between taxable and amount eligible for exclusion by using the following formula.
   • The total days available for rent will be divided by the total days owned to determine the portion of the remaining amount of gain that is taxable for the rental period
   • The balance will be eligible for the home sale exclusion
3. TurboTax will do all the calculations based on your entry

Steps to enter the Sale of Home in TurboTax: Wages and Income > Less Common Income > Sale of Home

1. On the screen Primary use of home select 'Yes'
2. Enter the number of days used as a rental (nonqualified use)
3. Continue to Depreciation after May 6, 1997 > Enter the total depreciation for rental and home office in both boxes

This will allow TurboTax to handle the sale with the correct amount of taxable gain and excluded home sale gain. 

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