How can I change the cost basis entered incorrectly for a rental property sold? I know the correct value, but cannot find a way to change what is there.

[MarilynG]

If you sold a current rental property, report this in the Rental section. 

EDIT your property and indicate in the Property Profile that you sold the property.

In the Sale of Property/Depreciation section, EDIT your property asset and report the Date of Sale, plus Date Started Using for Business (if used personally prior). 

TurboTax calculates the Prior Depreciation amount.  You will then enter the Asset Sales Price, Asset Sales Expenses, and Land Sales Price/Expenses. 

If you are reporting the sale of a Rental Property that is not currently reported as a rental,  report the sale under 'Sale of Business Property'.  Type 'sale of business property' in the Search area, then click  on 'Jump to sale of business property' to get to this section.

Check the first box 'sale of rental property that you haven't already reported.'

If you lived in the home for two of the five years prior to sale, you may be able to exclude part of your Gain on the sale of the rental property.   

If this applies,  type 'Sale of Home' in the Search area, then click on 'Jump to sale of home'.   You will need to enter the Prior Depreciation amount TurboTax calculated for you when you reported the sale of the rental previously. 

[Edited 03/29/2022 3:13 pm]

[ppostma7104]

You say "You can change your 'Cost Basis' amount if your property has increased/decreased from the Cost you originally entered when you set up your Rental Property "

More precisely don't you mean "if there have been items that adjust your cost basis, such as sales expenses or improvements"?  The change in market value is not relevant, right?

[Carl]

For starters, if you change the amount already entered in the COST and/or the COST OF LAND box, you are guaranteed to screw things up royally. That will throw off all the prior year's depreciation taken, as well as the current year's depreciation. So under no circumstances do you ever change the originally entered cost basis on a rental asset. Not ever.

As you're probably aware, when you first start renting property the amount used for depreciation is the "lesser" amount of what you paid for it, or it's FMV on the date placed in service. For property purchased prior to 2008 and placed in service as rental property between the end of 2008 and 2016, it's perfectly possible that the "lesser" value was the FMV of the property at the time you placed it in service. So that would be the correct amount to enter in the COST and COST OF LAND box in the tax year you initially placed the property in service and started depreciating it.

Now if you sold the property at a loss, then you will use those values in the rental section to report the sale. This actually reduces the amount of loss you can claim. But that's the law weather we agree with it or not.

If you sold the property at a gain, then you use the higher value - which is what you actually paid for the property. This actually benefits you, because it reduces your taxable gain.

So in your case you can not report the sale in the SCH E section. Instead, you have to report it in the "Sale of Business Property" section. This is the only way possible with TurboTax, to use the correct values for correctly reporting the sale. Here's the procedure.

First, start working through the rental property and in the Property Profile Section indicate that you sold the property. YOu will also select the option that you converted the property to personal use. (When asked later, your conversion to personal use date will be the date you closed on the sale.)

After working through the rental income and expenses section and entering all pertinent data there, the next section is "Sale of Assets/Depreciation". You have to work through each individual asset listed one at a time. you are going to do several things as you work through each asset, as you need to gather information that you will need later in the "sale of business property" section.

As you work through each asset, you will indicate that you "stopped using this asset in 2019". Then on the "Special Handling Required?" screen, you will select YES.  If you select "NO" then you will be FORCED to enter sales information. You don't want to do that in this section. So select NO.

As you work through each asset you will need to write down the amounts on each asset for "Prior year's depreciation already taken" and "current year's depreciation" that will be taken. You must also include in that any and all Special depreciation allowance you may have taken on an asset, as well as any SEC179 deduction (which is rare for residential property) that you may have taken in the past.

You must do the above for each individual asset listed. When done, add up all the depreciation numbers you wrote down. You will need this total for when you report this sale in the "sale of business property" section.

Now if you claimed any vehicle use for this rental at any time during your ownership of it, you also have to show disposition of the vehicle. So you'll work through the "Vehicle Expenses" section.

Since I seriously doubt you sold the vehicle as part of the rental property sale, simply indicate that you removed the vehicle for personal use and you can make the date for that the same as your closing date on the sale, or any date before the closing date.

Once all the above is done, and done correctly, 2019 will be the last year you will report anything concerning this rental on SCH E. Now you're ready to move on to the "sale of business property" section to report the sale. This section is fairly easy and self-explanatory. So at this point I don't see a need to go through any step-by-step details. The improtant thing is, you have all the information from the SCH E, that you will need to report this sale in the "sale of business property" section.

[nsrende]

This was incredibly helpful, as my situation is exactly as your described - selling rental property for a profit which had a lower FMV at time of the conversion. Im now using 2021 Premier and your guidance seems applicable for this version as well. Unfortunately, I have already entered the Sale info in the Schedule E section and cannot figure out a way to remove it now. I understand from your earlier response that I will need to report this sale instead in the separate Sale of Business Property

[KrisD15]

Go back to the sale you reported on Schedule E (in the rental section) and edit.

Select "Rental Properties and Royalties"

Select Yes to review

Continue through to the Summary screen

Select Edit for the property 

Scroll to "Sale of Property / Depreciation and select Update

Select "Yes" I want to go to my asset summary"

Edit the property 

Continue through this interview and change the answers to YES for Special Handling Required 

Continue to follow the directions listed by Carl above. 

Enter the sale in the Sale of Business Property section 

[nsrende]

I have followed the advise above and I believe this has all worked out as recommended. My one remaining problem is that during the Error Check, TT is still asking for the 'Asset Sales Price' on the Home Sale Wks and the Schedule E Worksheet. If I add the Sales Price, everything explodes. If I leave it blank, the Error remains. 

[MarilynG]

Yes,  you have to enter the Sales Price of the rental property you sold.  Report the sale in the Rental section first, under both Property Profile and Assets/Depreciation (where the rental property is listed as an Asset).

Click this link for more info on How to Report Sale of Rental Property.

Your Gain or Loss is calculated on the Sales Price, minus the Current Cost Basis + Sales Expenses.

The Current Cost Basis is the Original Cost Basis of the asset (when you set it up as a rental), minus depreciation taken.  

Often  you would have a Gain on the sale of rental property, since you are recapturing depreciation previously claimed as a deduction.  If you made improvements to the property after renting it (but before selling it), you can add that to the Cost Basis when reporting the sale. 

If you lived in the home for two of the five years prior to the sale, part of your gain may be excluded.  If this applies, type 'Sale of Home' in the Search area, then click on 'Jump to sale of home'.  You will need to enter the Prior Depreciation amount that TurboTax calculated for you when you reported the sale of the Rental Property. 

[Edited 03/29/2022]

[nsrende]

Unfortunately, this still is not working and I continue to get a TT error (that prevent e-filing). 

Yes, I sold the rental property in March 2021. However, the original cost basis used to establish the depreciation was not the original cost of the condo, it was the FMV of the condo at the time of the conversion to a rental. My understanding (from an accountant and from the thread above - See Carl 07-12-20 comments) is that if I enter the Sale Price in the Rental Property Section (Schedule E), TT adjusts all of the depreciation amounts for prior years and everything gets screwed up. As mentioned in this thread, I have instead indicated that the property was converted to personal use. Then, I have reported the Sale in the 'Sale of Business Property' section with the correct Cost Basis (include selling costs) and prior Depreciation included. All of the profit and tax calculations now appear correct, but TT still doesnt like that I have not included a Sales Price in their worksheets for Schedule E. 

[PatriciaV]

@nsrende

Have you tried entering your Ending Adjusted Basis in the property as the Sales Price? This would result in zero gain/loss, which is the same as the conversion to personal use. You are reporting the actual sale in another section, so you don't need to capture that transaction under the Rental Property.

[sootmaker]

I sold my rental property in 2021, also had it rented out a few months prior.  The deprecation amount was incorrect as the cost basis was not correct.  Example, I paid $200,000 for the property, but the depreciation (cost Basis) was $150,000.  I need to find someplace to modify the cost basis to $200,000 and also put the selling closing costs in?  Where would I do that?  In a previous post you stated to change it in:  Ending Adjusted Basis in the property  (can not find that anywhere).  I get in a loop where it asks for selling price for property and land, but never asks for a new cost basis.  Thanks

[powerdan74]

I am using the above work around to correct the original cost of our rental property.  I have entered it in the business property sale, however I do not know what to do with the various improvement assets.  I captured all of the depreciation numbers but what do I do with them?  Do I re-enter each asset as a separate business property to sell or do those number get added the rental property numbers and if so, where at?

[AmyC]

When you use the program, it puts together the cost basis subtracts the accumulated depreciation and adds selling expenses to create the basis. You should not have to adjust the basis in the program.

For assets  other than the home, you will mark them sold at a price of $0 since they were free with the house.

@sootmaker

@powerdan74

[A320drvr]

When it asks for asset price what do I enter there ? Also it says business portion only in parenthesis .. what does this mean ?

It also says this for expenses and land values 

Thanks  

[JohnB5677]

If you purchased something for your business, the price you paid for it is the asset price.  

If you utilize that asset for both business and personal use, you will allocate the percentage used for business.

For example:  

• You purchase a laptop for $1,000.
• You utilized it 20% of the time for personal use.
• The business portion is 80%, or $800.

Reminder: When you're in TurboTax, and you're not sure of something, select the (?) next to the topic for more information.

If this does not completely answer your question, please contact us again and provide some additional details.

@A320drvr