Investors & landlords

What about the other Form 4562 items, from previous years, that are in various stages of their depreciation schedules? Everything from the house itself, to A/C units,

If you just follow the guidance at the end of this post, it all gets accounted for.  But one thing I want to point out concerning my comment of "zero percent business use" above. Depending on your specific and explicit situation, the program may not accept zero percent, and will "insist" on 1%. If this happens to you, then make the business use percentage 1% and the in service date the same date that you close on the sale. Then if any depreication is taken (it probably won't) it will be extremely minimal.

Is there a way to end depreciation (business use) without 'disposing' of the property or converting it to personal use?

Nope. If you convert it to personal use before the sale date, then you have no choice but to report the sale in the Sale of Business Property section. That could hurt, because all rental expenses incurred after you convert it to personal use are not deductible. Period. Some of those expenses "might" be deductible as sales expenses. But it's really more of a PITA to do it that way and increases the possibility of human error on your part.

Besides, for the bit of additional depreciation you'll be recapturing for 2019, it's gonna be taxed at your "ordinary" tax rate anyway, up to a maximum of 25%. So if you're in the 12% or 22% tax bracket already, it's not gonna make any difference.

What about land improvements (tree removal, distant from the structure)? How do you add those to the land basis of the property in TT as the IRS says they are not depreciable items?

Simple enter it for what it is ---- land improvement. If that don't work, then enter it as a normal rental property improvement. The only thing is, the COST and COST OF LAND will be exactly the same. That way, nothing is depreciated as it should not be for your specific land improvements.

Now course, you want to work through the SCH E section to get all your pertinent data entered. Then when you get to the screen with the "Done with Rental Property" button, click that button to exit and save all your changes and additions.

Then work through the rental section again to report the sale using the guidance below.

Reporting the Sale of Rental Property

If you qualify for the "lived in 2 of last 5 years" capital gains exclusion, then when prompted you WILL indicate that this sale DOES INCLUDE the sale of your main home. For AD MIL personnel who don't qualify because of PCS orders, select this option anyway, because you "MIGHT" qualify for at last a partial exclusion.

Start working through Rental & Royalty Income (SCH E) "AS IF" you did not sell the property. One of the screens near the start will have a selection on it for "I sold or otherwise disposed of this property in  2019". Select it. After you select the "I sold or otherwise disposed of this property in 2019" you continue working it through "as if" you still own it. When you come to the summary screen you will enter all of your rental income and expenses, even it it's zero. Then you MUST work through the "Sale of Assets/Depreciation" section. You must work through each individual asset one at a time to report its disposition (in your case, all your rental assets were sold).

Understand that if more than the property itself is listed in your assets list, then you need to allocate your sales price across all of your assets.  You will only allocate the structure sales price; you will NOT allocate the land sales price, since the land is not a depreciable asset.  Then if you sold this rental at a gain, you must show a gain on all assets, even if that gain is $1. Likewise, if you sold at a loss then you must show a loss on all assets, even if that loss is $1

Basically, when working through an asset you select the option for "I stopped using this asset in 2019" and go from there. Note that you MUST do this for EACH AND EVERY asset listed.

When you finish working through everything listed in the assets section, if you ever at any time you owned this rental you claimed vehicle expenses, then you must also work through the vehicle section and show the disposition of the vehicle. Most likely, your vehicle disposition will be "removed for personal use", as I seriously doubt you sold your vehicle as a part of this rental sale.