Investors & landlords

It depends.  If the two properties are equal in size and square feet as well as land, then you could split the cost, and depreciation in half for the one sold. Then enter then as two separate properties on your 2021 tax return.

This would allow you to sell only one of them while continuing to show the rental property you still own. However, if the rentals are not equal, but disproportionately sized then you must default to using the square feet and/or property tax assessed values to determine the percentage to use for the cost basis of each rental home/land. Once this is completed you are ready to separate the properties in your tax return, then proceed to report the sale of the one property. 

The selling price should be prorated for each asset then entered for each asset when you indicate they were sold or disposed of. You will not lose the remaining depreciation because you will use the remaining basis against the selling price to determine gain or loss. 

To figure out the selling price for each asset:

1. Take the current basis of each asset against the total combined basis of all of your assets to figure out the sales price for each one;

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.

Once you indicate the property is sold then the sales information screen will populate for you to enter the sales price both for land and building as well as the sales expenses.

• How to report the sale of a rental home

1. Start with the Federal tab
2. Click on Income and Expenses
3. Under Your income and expenses, scroll down to
4. Rental properties and royalties, click Edit/Add
5. Do you want to review your rental?, click Yes
6. Under Rent and Royalty Summary, click Edit
7. Click Update to the right of Assets/Depreciation.
8. Click Edit to the right of the assets 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. And continue to answer the questions
12. ​​​​​​​See the screen images below for assistance.