So I purchased a rental property a few years ago and have made various improvements to it over the years, with over $200K invested across these on top of the original property itself. I sold this property last year and from my understanding of how TurboTax handles assets on a real estate property, I need to individually mark each asset as no longer in use and sold. What I can't quite figure out is how do I allocate the sales proceeds across these assets? Should I figure out what percentage of my investment was the original purchase and what was improvements and split the sales that way too? I don't understand why TT can't just automatically do this. 😕
You may allocate the sale proceeds and selling expenses using any reasonable method. Most taxpayers use the adjusted basis at the time of the sale. Calculate the percentage of basis that belongs to each asset, then apply that percentage to the sale.
Example for allocating to property and land:
You can calculate the adjusted basis from the Depreciation Report included with your prior year return. Be sure to add current and previous depreciation together before you subtract that total from the original cost basis.
Because the allocation method is the taxpayer's choice, TurboTax lets you decide how to report the sale.
Thanks for the info. So following your example, my costs were $25K land, $50K property, $20k new foundation, $5k new windows, I would split my sales 25%, 50%, and 20%, and 5%?