I purchased a house in 2004 for $160,000. In 2012 I needed to move, but could not sell the house due to the housing market crash. I converted it to a rental in 2012. I still owed $130,000 on the house, but the FMV was only $90,500. I had to use the lesser of the two to calculate deprection. I sold the house in 2019 for $151,000 (still less than the original price). After paying off the outstanding mortgage I received $37,000 at closing.
When entering these numbers into TurboTax under Rental and Royalties, it shows I had a huge gain and I owe a lot of taxes. The rental had $22,021 in depreciation. I never made a profit on the rental as I only charged rent to cover my mortgage cost.
Is this correct? Why do I need to pay so much taxes when I sold the house for less than the original cost? If I entered the information in the the Sale of Business section then it does not show I have a gain. Can I use this section to report the sale?
