How do I enter sale of my former home recently used as a rental

[M-MTax]

There should be a rental property section in TT premier so start there. 

[Carl]

Assuming the last occupant to move out of the property prior to the sale was a renter, the below guidance would apply.

Reporting the Sale of Rental Property

If you qualify for the "lived in 2 of last 5 years" capital gains exclusion, then when prompted you WILL indicate that this sale DOES INCLUDE the sale of your main home. For AD MIL personnel who don't qualify because of PCS orders, select this option anyway, because you "MIGHT" qualify for at last a partial exclusion.

Start working through Rental & Royalty Income (SCH E) "AS IF" you did not sell the property. One of the screens near the start will have a selection on it for "I sold or otherwise disposed of this property in  2019". Select it. After you select the "I sold or otherwise disposed of this property in 2019" you continue working it through "as if" you still own it. When you come to the summary screen you will enter all of your rental income and expenses, even it it's zero. Then you MUST work through the "Sale of Assets/Depreciation" section. You must work through each individual asset one at a time to report its disposition (in your case, all your rental assets were sold).

Understand that if more than the property itself is listed in your assets list, then you need to allocate your sales price across all of your assets.  You will only allocate the structure sales price; you will NOT allocate the land sales price, since the land is not a depreciable asset.  Then if you sold this rental at a gain, you must show a gain on all assets, even if that gain is $1. Likewise, if you sold at a loss then you must show a loss on all assets, even if that loss is $1

Basically, when working through an asset you select the option for "I stopped using this asset in 2019" and go from there. Note that you MUST do this for EACH AND EVERY asset listed.

When you finish working through everything listed in the assets section, if you ever at any time you owned this rental you claimed vehicle expenses, then you must also work through the vehicle section and show the disposition of the vehicle. Most likely, your vehicle disposition will be "removed for personal use", as I seriously doubt you sold your vehicle as a part of this rental sale.

[Hal_Al]

I'm of the opinion that it will go smoother if you enter it as a home sale, instead of sale of a rental.

In TurboTax (TT), enter at:

- Federal Taxes tab

 - Wages & Income

Scroll down to:

-Less Common Income

     - Sale of Home

The interview will ask if you some unqualified use (e.g. rental). Answer no, if the rental occurred after you moved out. In TT, at the page where it asks if you had any other use of the home it says: "Note: if you used your home for reasons other than primary residence, after it was no longer your primary residence, select 'no'.

You will be asked to enter the amount of depreciation you claimed or should have claimed.  You may enter one total number, for all depreciation claimed.  You must recapture (pay tax on ) depreciation even if the rental occurred after you moved out. 

[rdsdtax]

Do you think it would result in the same tax outcome if I enter it as a home sale, rather than a sale of a rental property?  I was thinking if I record it as the sale of a rental, I would be able to deduct expenses for the part of 2020 that I owned it, but I would have to pay gain on depreciation recapture. So maybe just the home sale option is better, and more accurate anyway.

[Hal_Al]

Either way you enter it, TurboTax should come out with the same results.  Either way you get to deduct your qualified rental expenses prior to the sale.  In the rental interview, you indicate it was taken out of service, rather than sold,  if you'll be reporting the sale under home sale.

It's just opinions on which way is easier in the interviews. 

[rdsdtax]

Thank you. So if I enter the sale in the Home Sale section, I will still have entries for expenses in the Sale of Rental section? such as: management company fees 

[Hal_Al]

Q. So if I enter the sale in the Home Sale section, I will still have entries for expenses,  such as management company fees, in the Rental income and expenses section. 

A. Yes

[rdsdtax]

And if i did not attempt to rent it in 2020, but was just selling it (which i did in June), i click the button that says i did not attempt to rent it in 2020, and TT says to delete it as a rental and just report it in the home sale section.

sorry for all the questions. 

[rdsdtax]

TT is asking if i have loss carryforward. i did have a loss on the property in 2019 that i did not take, but i dont know if it is considered carryover, since TT doenst give me the line item that the loss should come from.

[Hal_Al]

That's correct.  If you did not rent it or attempt to rent it in 2020, you cannot deduct any expenses. You effectively took it "out of service" prior to 2020.

[Carl]

Do not select the option for "I did not rent or attempt to rent in 2020". If you do, then not only is the SCH E deleted, you also lose all of your depreciation history and carry over loss history. You need this information to correctly report the sale.

What you need to do is covert the property to personal use, with a conversion date of 1/1/2020. Remember, you have to do that for each individual asset in the assets/depreciation section.  This is the only way that you can get the "correct" amount of prior depreciation, which you will need when you report the sale in the "Sale of Business Property" section.

You'll show zero income in the rental income section.

You don't even need to work through the rental expenses section.

You *do* need to work through the assets/depreciation section.

[rdsdtax]

I do this even if i did not move back into the old house? what i did was buy a new house in 2018 and moved into it, rented out the old house for one year in 2019, then sold the old house in 2020.

also, how do i know if i get to carry over 2019's operating loss?

[Carl]

I do this even if i did not move back into the old house?

Yes. If you did not even attempt to rent the property in 2020, then it's no longer business property. It's personal use property. What you use it for on the personal side is irrelevant. It could sit empty for all that matter.

how do i know if i get to carry over 2019's operating loss?

If you convert the property to personal use *AND* if you actually have any carry over losses from 2019, they're already imported into the 2020 program. We'll deal with getting that data only after you have completed the process of converting the property to personal use. Those numbers for depreciation and carry over data will not be correct until "after" you have completed the process of converting the property to personal use.

The program needs a specific date that you stopped using the asset for business. Only then can it determine things like your "definitive" total amount of depreciation taken on the property.

-When you elect to edit the rental property itself, about 3-4 screens in is a selection for "I converted this property from a rental to personal use in 2020". Select that option, and press on through the program.

In the Assets/Depreciation section you *MUST* do the following for each individual asset listed.

- Elect to Edit that asset and start working it through.

- On the "Did you stop using this asset in 2020"? Select YES.

- For "Special Handling Required?" Select YES.

- For your conversion/disposition date, enter 1/1/2020.

- On the final summary screen, write down the name of the asset, the total amount of depreciation taken in prior years, and the amount of depreciation (f any) for 2020.

Do the above for each individual asset listed.

When completed, add up all the numbers you wrote down to get the total amount of depreciation taken on the property and all assets.

Then select the FILE tab, and under that tab select the sub-tab for "Print/Save for your Records". Save what you have as a PDF file.

Then double-click the saved PDF file to open it. Search that PDF File for IRS Form 8582. Print all three pages of that form. It has your carry over losses on it, which you will need for reporting the sale. Take note that if you don't have the form 8582 in the PDF file, then you don't have any carry over losses. Due to tax law changes in 2018, it's beginning to become more common for there to not be any carry over losses.