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cabrerag9505
Level 1

Hello, I am interested in starting my 2020 tax preparation. I am selling a rental property and have a huge loss from the tenant but a capital gain from the home.

 
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Opus 17
Level 15

Hello, I am interested in starting my 2020 tax preparation. I am selling a rental property and have a huge loss from the tenant but a capital gain from the home.

For planning purposes only, you can use turbotax online, which is the 2021 version.  It is "free to start."  Just make sure you don't actually try to file a return.  The 2021 version will go offline and you will lose all your data entries sometime around October 20, then Turbotax online will come back for 2022 in November, even though it won't be finished and ready to file until mid-January.  

 

The online version won't give you access to detailed forms, just a bottom line dollar figure.  You can get detailed access to the forms if you buy Turbotax to install on your own computer, but you would have to buy the 2021 version.  Then you would have to buy the 2022 version when it comes out and enter all your data again, so it depends if the planning ability is worth paying double for the software.

 

"Loss from a tenant."

 

Lost revenue because they did not pay rent is not a deduction.  You just have less income to report.  Expenses to repair tenant damage is a complex issue.  Expenses while the property is being held out for rental are rental expenses.  If you made repairs after the tenant moved out, thinking you would re-rent, they are rental expenses and can be deducted from the rent paid.  If your expenses are more than your rent income, you have a loss.  Unfortunately, this is a "passive loss" and can only offset other passive income (like from other rental properties); passive losses usually can't be deducted against other income.  But you can "suspend" the loss and take it against future passive income, such as if you buy a new rental property in the future.  See here for more,

https://www.nolo.com/legal-encyclopedia/can-you-deduct-your-rental-losses.html

 

If your repair expenses occurred after you took the house off the rental market, they are probably not allowable as deductions against your rental income.  However, you need to make a distinction between repairs and improvements.  An improvement is a property "betterment" that adds value or extends the useful life of the property, and must be permanently attached to the property.  A new roof or new carpet are examples of improvements.  Improvements are not deductible rental expenses even if carried out while the property was rented, but they add to the cost basis and will reduce your capital gains. 

 

"Capital gain"

Yes, you have to pay this.  Remember your gain includes depreciation recapture, which is taxed as ordinary income (up to 25%), then the rest of the gain is taxed as long term capital gains at 15% or 20% depending on your total income.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

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16 Replies
NCperson
Level 15

Hello, I am interested in starting my 2020 tax preparation. I am selling a rental property and have a huge loss from the tenant but a capital gain from the home.

for starters, you can't use the online version of turbto tax to complete your 2020 tax return.. Online only accomodates 2021 taxes returns (and that will shut down in October).  

 

You must use the desktop version

 

https://turbotax.intuit.com/personal-taxes/past-years-products/

 

not sure what you mean by 'huge loss from tenant', but that can be addressed once you begin the tax return.

 

 

cabrerag9505
Level 1

Hello, I am interested in starting my 2020 tax preparation. I am selling a rental property and have a huge loss from the tenant but a capital gain from the home.

Sorry my mistake, I meant 2022, not 2020. 

tagteam
Level 15

Hello, I am interested in starting my 2020 tax preparation. I am selling a rental property and have a huge loss from the tenant but a capital gain from the home.


@cabrerag9505 wrote:

Sorry my mistake, I meant 2022, not 2020. 


The software for the 2022 tax year is not yet available (and will not be until late October, at the very earliest).

 

Further, the forms you will need (as well as the software) will not be finalized until some time in January. 

NCperson
Level 15

Hello, I am interested in starting my 2020 tax preparation. I am selling a rental property and have a huge loss from the tenant but a capital gain from the home.

@cabrerag9505 you will find that when the software is realized, much of it is considered 'draft' and will not be finalized until the IRS begins accepting returns, which is normally the last week of January or the first week of February.

Critter-3
Level 15

Hello, I am interested in starting my 2020 tax preparation. I am selling a rental property and have a huge loss from the tenant but a capital gain from the home.

Even though the downloaded program comes out sometime in November each year it is only a beta version which will not be fully operational until  late January at the earliest (much later for some forms and the state programs).  Efiling will not be open until late January at best so do not be in a rush to file.

 

Same with the Online version which becomes functional sometime in December. 

 http://taxpreparationsoftware.com/

                                    

 

 

If you are trying to do some 2022 tax planning then use the fully operational 2021 downloaded version instead. 

 

 

 

This is my mini version of  a tutorial  that should be in the downloaded program: 

 

 

What is Forms Mode?

Forms Mode lets you view and make changes to your tax forms "behind the scenes."

If you're adventurous, you can even prepare your return in Forms Mode, but we don't recommend it. You may miss obscure credits and deductions you qualify for, and you may forget to report things that will come back and haunt you later.

Forms Mode is exclusively available in the TurboTax CD/Download software. It is not available in TurboTax Online.

                  

Related Information:

                             

If you want to play around with different figures and tax scenarios without affecting your original return you can ….

  • >>>In the TurboTax CD/Download software by creating a test copy
  • 1.  Open your return in TurboTax. 
  • 2.  From the File menu, choose Save As. 
  • 3.  Give the copy a new name to distinguish it from the original (for example, by adding "Test" or "Example" to the file name). 
  • 4. Click  Save. You are now safely working in the test copy and anything you do here will not affect the original. 
  •  https://ttlc.intuit.com/questions/1900642-how-to-make-a-test-copy-of-your-return

                        

  • >>  use the WHAT IF tool: 
  • - Click Forms Icon (upper right of screen) or Ctrl 2 (forms view) 
  • - Click on the Open Form Icon 
  • - In the “Type a form name.” area type What-If (with the dash), click on the name of the worksheet - click on Open Form 
  • - You will see the worksheet on the right side of the screen; enter the information right into the form 
  • - To get back to interview mode - click on the Step-by-Step Icon (upper right of screen) or Ctrl 1

 

Once you have filed successfully … you can shut off the auto updater function and then save the return &  .taxfile.

                    

It's always a good idea to make a backup copy of your tax data file, in case your original gets lost or corrupted. Here's how:

  1. From the File menu in the upper-left corner of TurboTax, choose Save As (Windows) or Save (Mac).
  2. Browse to where you want to save your backup.
    • Tip: If you're saving to a portable device, save it to your computer first to prevent data corruption. Then, after completing Step 4, copy or move the backup file to your device.
  3. In the File name field, enter a name that will distinguish it from the original tax file (for example, add "Backup" or "Copy" to the file name)
  4. Click Save and then close TurboTax.
  5. Restart TurboTax and open the backup copy to make sure it's not corrupted. If you get an error, delete the backup and repeat these steps.

If you make changes to your original tax return file, repeat these steps to ensure your original and backup copies are in-synch.

Related Information:                             

 

AND save it as a PDF so you have access to a copy even if you don’t have the program still installed and operational :

AND protect the files :

 

*** Other clues to the downloaded program ***

 

In the forms mode ... double click  or right click on a box on a form to data source it ... sadly it doesn't work on all boxes. 

 

What's the meaning of all the different colors in Forms Mode?

When you look at an onscreen tax form using Forms Mode, you might wonder why one figure is blue and the one next to it is red or black.

These colors indicate the source of that data.

Color

 Meaning

Blue

You entered this data, either in the interview or Forms Mode.

Black

The program entered this data or calculated this amount.

Red

This data has either been overridden or is invalid (for example, a ZIP code that doesn't exist).

Red italics

You marked this amount as estimated.

Black italics

The program calculated this amount from an amount you marked as estimated.

Purple

This information has supporting details.

Aquamarine

This data was transferred over from last year.

Green

This data was imported from Quicken or QuickBooks.

Yellow fields (Windows)

Yellow fields allow user input. Anything you enter here shows up in blue.

Carl
Level 15

Hello, I am interested in starting my 2020 tax preparation. I am selling a rental property and have a huge loss from the tenant but a capital gain from the home.

I am selling a rental property and have a huge loss from a tenant....

Can you clarify that?  How can it be that you have a loss from a tenant?

VolvoGirl
Level 15

Hello, I am interested in starting my 2020 tax preparation. I am selling a rental property and have a huge loss from the tenant but a capital gain from the home.

If the tenant is behind paying the rent you will just have less income to report.  You can't deduct rent not paid.  

SweetieJean
Level 15

Hello, I am interested in starting my 2020 tax preparation. I am selling a rental property and have a huge loss from the tenant but a capital gain from the home.

or did the tenant cause unreimbursed damage? 

Opus 17
Level 15

Hello, I am interested in starting my 2020 tax preparation. I am selling a rental property and have a huge loss from the tenant but a capital gain from the home.

For planning purposes only, you can use turbotax online, which is the 2021 version.  It is "free to start."  Just make sure you don't actually try to file a return.  The 2021 version will go offline and you will lose all your data entries sometime around October 20, then Turbotax online will come back for 2022 in November, even though it won't be finished and ready to file until mid-January.  

 

The online version won't give you access to detailed forms, just a bottom line dollar figure.  You can get detailed access to the forms if you buy Turbotax to install on your own computer, but you would have to buy the 2021 version.  Then you would have to buy the 2022 version when it comes out and enter all your data again, so it depends if the planning ability is worth paying double for the software.

 

"Loss from a tenant."

 

Lost revenue because they did not pay rent is not a deduction.  You just have less income to report.  Expenses to repair tenant damage is a complex issue.  Expenses while the property is being held out for rental are rental expenses.  If you made repairs after the tenant moved out, thinking you would re-rent, they are rental expenses and can be deducted from the rent paid.  If your expenses are more than your rent income, you have a loss.  Unfortunately, this is a "passive loss" and can only offset other passive income (like from other rental properties); passive losses usually can't be deducted against other income.  But you can "suspend" the loss and take it against future passive income, such as if you buy a new rental property in the future.  See here for more,

https://www.nolo.com/legal-encyclopedia/can-you-deduct-your-rental-losses.html

 

If your repair expenses occurred after you took the house off the rental market, they are probably not allowable as deductions against your rental income.  However, you need to make a distinction between repairs and improvements.  An improvement is a property "betterment" that adds value or extends the useful life of the property, and must be permanently attached to the property.  A new roof or new carpet are examples of improvements.  Improvements are not deductible rental expenses even if carried out while the property was rented, but they add to the cost basis and will reduce your capital gains. 

 

"Capital gain"

Yes, you have to pay this.  Remember your gain includes depreciation recapture, which is taxed as ordinary income (up to 25%), then the rest of the gain is taxed as long term capital gains at 15% or 20% depending on your total income.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
cabrerag9505
Level 1

Hello, I am interested in starting my 2020 tax preparation. I am selling a rental property and have a huge loss from the tenant but a capital gain from the home.

Understood, the tenant is behind about 7K, so just report lesser income?

Opus 17
Level 15

Hello, I am interested in starting my 2020 tax preparation. I am selling a rental property and have a huge loss from the tenant but a capital gain from the home.


@cabrerag9505 wrote:

Understood, the tenant is behind about 7K, so just report lesser income?


Yes, you report the income you actually received and the expenses you actually paid.  You can't take an extra "deduction" for the lost rent because you can't subtract dollars from your income that were never included in your income in the first place.  Because you have less income to report, you will pay less tax.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
cabrerag9505
Level 1

Hello, I am interested in starting my 2020 tax preparation. I am selling a rental property and have a huge loss from the tenant but a capital gain from the home.

Is the mortgage at the time of renting considered an expense?

VolvoGirl
Level 15

Hello, I am interested in starting my 2020 tax preparation. I am selling a rental property and have a huge loss from the tenant but a capital gain from the home.

You don't actually expense the mortgage.  The interest paid can be an expense.  Then you should have added the house cost as an ASSET and depreciate the cost over 27.5 years.  

Opus 17
Level 15

Hello, I am interested in starting my 2020 tax preparation. I am selling a rental property and have a huge loss from the tenant but a capital gain from the home.


@cabrerag9505 wrote:

Is the mortgage at the time of renting considered an expense?


If you haven't done rental taxes before or aren't sure what we are talking about, you need to see a professional pretty soon.

 

One of your rental expenses is depreciation -- that's wear and tear on the house.  You deduct the value of the house gradually over 27.5 years (the recovery period for rental property under tax law).   So if the house cost you $100,000, you would get a deduction of $3636 per year that represents the value of the house you are using up by renting it.

 

If you borrowed money to buy the house, you can deduct the interest you paid, but not the principal.  The principal you pay as part of the mortgage represents the value of the home, which you are already recovering through depreciation.  The interest portion of the payment is a rental expense, as long as the interest is paying for the rental property.  (If you took out an HELOC and use the proceeds for something else, the interest does not count as a rental expense.)

 

Other rental expenses are utilities, insurance and repairs and maintenance.  Improvements (such as, you rent a home for 10 years and halfway through you have to replace the roof or hot water heater) are added as additional assets on the property, and the cost is either deducted immediately or spread out through depreciation, depending on the type of asset and the cost.

 

When you sell, you recapture the depreciation you took or could have taken.  You must recapture and pay tax on past depreciation even if you forgot to take it.  That can be corrected by an accountant.  

 

If any of this is strange to you, see an accountant or qualified tax preparer now, while it's not their busy season, so they can help you gather needed information and documents and start working on your return. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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