Investors & landlords

Your questions will be shown in italics below and the answers will follow to assist you with your rental property sale. 

I supposed that I added the 2,000 dollars cost of the sunroom to the building. Now, Do I change back the purchase price to 53,000 when turbo tax ask?  If so how do I add the $2,000 for the Sunroom?

• No, you do not change back the purchase price. The $2,000 you added was the correct action because this was a capital improvement to the home before you began renting out the property. 

Also I was able to take only 99.00 dollars out of 3,352. in closing charges for the purchase. Moreover I refinanced in 1993 and spent 1,954 in settlement charges. Am I able to use this amount in my cost basis?  If so where do I enter that?

• It's not clear exactly why you did not include your purchase charges as part of the original cost basis when the home was converted to a rental property.  The settlement charges that were not used should be added to any sales expenses, which will reflect the correct net result (gain or loss).

Some people say that everything has to be entered under Rental and Royalties

• This is the correct action since you rental property was active on the 2020 tax return and should have transferred to your 2021 return. In other words you still have an active rental property that you are now trying to dispose of.  Follow the steps below to enter your sale.

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.

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 by telling TurboTax how and when it was disposed of.  Follow the instructions below.

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

You might also review information here.