Entering information for sale of rental property

[salafish]

Hello, 

We sold a rental house in 2021 that we originally inherited from my parents but then refinanced, paid off my brothers and used as rental property.  We never lived in the house.

I'm trying to enter the information in Turbotax as I've done our taxes this way ever since we acquired it.  Do I split the sales price between the property and the structure?  And then sell the depreciated assets 'separately' and just estimate the value?

Also, we live in Washington State and the house is in Oregon so we paid estimated tax on the sale to Oregon when it closed.  Just want to make sure we get credit for that.  My husband's income is from Oregon but mine is in Washington with no state income tax. I feel like the federal portion of our capital gains is not taking into consideration that we should only pay on the Oregon portion of all this gain and not our full income. Maybe this is over my head but I'm hoping someone can tell me a clear approach to working through all of this.  I've always been so happy with how easy it was to follow Turbotax through the process but this is as clear as mud.  Much appreciation to anyone who can make this easier for me to work through.

[DavidD66 · Accepted solution]

Yes, you split the sales proceeds between the land (property) and improvements (the structure)  If you set up the rental property correctly in TurboTax, you will have multiple assets:  The house/structure, the land, and any other assets added, such as appliances, renovations, additions, etc.  I recommend you allocate the sales proceeds based on the remaining cost basis of each asset.  For instance, if you sold the rental property for $200,000 and had the following adjusted basis for each asset:

House - $50,000

Land - $25,000

Addition - $15,000

Appliances - $10,000

You would apply the proceeds to those assets as follows

House - $100,000

Land - $50,000

Additions - $30,000

Appliances - $20,000.

As for your comments about the state and federal capital gains, you will need to clarify, and perhaps phrase as a question.  If you have a gain, 100% of that gain is subject to federal tax, either capital gain or depreciation recapture.  Similarly, since the property is in Oregon, 100% of the gain is taxable by the state of Oregon.

[salafish]

Many thanks for this.  I think I can finish up with your information!  Sally