How do I enter info for the sale of a condo that was originally my primary residence then converted to a rental property for about 9 years out of the 14 years I owned it?

[gobucks1013]

Bought the condo in Oct  2003. We lived in it until July 2007 at which point we bought a new home. The condo sat vacant on the sales market for a year before we decided to use it as a rental in June 2008. After a year of double mortgage payments, we were happy to not be eating $1200/mo between the mortgage and the HOA fee so we did not charge the tenants the HOA fee. We basically lost $100-120/mo on that property for the majority of the time we rented it. We just sold the property in Nov 2017 for a profit of $41,900. Looking for guidance for how to properly enter this information in my 2017 return as well as info on what taxes we might owe on the sale.

Thank you!

[IreneS]

Since you did not use the property as your main home during at least 2 of the last 5 years before the date of sale, it is considered the sale of an investment .

You will have to enter the sale of the property, as well as any assets related to the property that you may have entered separately (for example, new roof, appliances, improvements).

To do this please follow these steps:

1. Click on Federal  > Wages & Income 
2. In the Rentals, Royalties, and Farm section click on the Start/Revisit box next to Rental Properties and Royalties (Sch E).  [See Screenshot #1, below.]
3. On the Income from Rentals or Royalty Property You Own  screen, click Yes.
4. If you have already entered information about your rental, you will come to the Rental and Royalty Summary screen.  Click on the Edit box next to the property.  [Screenshot #2]
5. If you haven't yet entered any information about the property, you will see a screen, Is This a Rental Property or Royalty?  Mark the button for Rental property and enter information about the property. 
   
6. Continue through the screens, entering the requested information.
7. On the screen, Do Any of These Situations Apply to This Property? mark the box that you sold or disposed of the property in 2017.
   
8. When you come to the screen, Review Your [XX] Rental Summary click the Start/Update box next to Sale of Property/Depreciation.  
9. If you have assets entered already, on the screen, Do you want to go directly to your asset summary? mark the Yes radio button and click Continue.
10. Click Edit next to the property.
11. If you haven't yet entered any assets, continue through the screens to enter the house.
    
12. On the screen, Tell Us More About This Rental Asset,  mark the box that the item was sold and enter the date of the sale.
13. You will eventually come to a screen to enter the sales information.
14. Continue through the interview, entering the requested information.
15. You will be brought back to Your Property Assets.  If you have other assets related to this property, follow the same procedure with them by clicking on Add an Asset
    

[gobucks1013]

Thank you for taking the time to leave me such helpful and thorough feedback! I'm hung up on the "Special Handling Required?" section of the Asset summary. I believe the very first option listed there pertains to me: "The business use percentage of this asset varied during the years you owned the asset." Since it was not used as a rental for 5 of the 14 years I owned it, isn't the answer to that question a "Yes?"
When I click the "Learn More" link next to that option, the pop window says this: "If the business use percentage varied over the life of the asset, the program cannot automatically compute the sale information.
This is where I'm having trouble. Any insight?

[IreneS]

The business use percentage refers only to the time that it was a rental.  It wasn't considered a depreciable asset while you were living there.
Let's say we're talking about the house itself.  During the 9 years was the whole house always a rental property?  You didn't move into the rec room and use it for personal use during that time, right?  🙂  So the business use was always 100% -- it didn't vary.
Answer No to the Special Handing question.

[gobucks1013]

Ah, makes sense. I did that and now I'm hung up with how to enter the sale amounts. It's asking for the asset sale amount and the land sale amount. The total sale amount for the property was $175K. The settlement statement does not delineate how much of that is the condo vs. the land itself.  Also, we still had an outstanding mortgage lien of $111K that was paid off with the sale of the property. When I entered the sale amount of $175K, Turbo Tax hit me with about a $30K tax. We only profited just under $42K. I think Turbo Tax thinks that $175K was all profit. At least, I'm hoping that's the case. Does the $111K mortgage balance payoff get entered somewhere else?

[IreneS]

1. For the land/condo percentage, check your tax bill or assessment.  It should have separate values for the land and condo--you can use that percentage to allocate the sales price.

2.  Be sure you're including everything in the Adjusted Cost Basis.
Cost Basis =
Purchase price
+  Purchase costs (title & escrow fees, real estate agent commissions, etc.)  
+  Improvements (replacing the roof, new furnace, etc.)
+ Selling costs (title & escrow fees, real estate agent commissions, etc.)
- Accumulated depreciation (as reported on your tax forms)

And then calculating your profit or loss would be:
Selling price - Cost Basis = Gain or Loss

The mortgage doesn't really entering into the calculation -- it is considered debt service.

[IreneS]

Make sure TT is not calculating depreciation for the time you lived in the house:
**On the screen, "Tell  Us More about this Rental Asset,"  for the question "Have you used this item 100% for bsns since you acquired it," answer NO.  
**Then mark "I used this item for personal purposes before I started using it in this bsns.  
**You will then be asked when you started using the house for business (when you started renting it out).  This will start the depreciation calculation on that date, not when you bought it.