Sold a Rental Property Stuck at Section "Special Handling Required?

[joelwoodall]

We sold our Rental on August 4th 2016. We originally purchased the home on May 9th 2008 and converted it to a rental on September 1st 2013. As I am going through the property asset section I am stuck at the section "Special Handling Required?

Do I select Yes or No? I believe I don't have to pay gains on the sale of the home because we lived in it for 2 out of the last 5 years prior to the sale.

Any help would be greatly appreciated.

[MargaretL · Accepted solution]

Please select NO as none of the situations in Special Handling Required apply to you.

Later on...

When going through the rental sale interview, be sure to enter Yes to Was this asset included in the sale of your main home? Question. Continue through the interview.   You will be asked Did you use this Home for Anything Other Than your Primary Home? - select No. (The wording sounds as if you should say yes because this home was used s a rental, but see the Note on screen that says "Answer no if used as other than a primary residence AFTER it was no longer your home" - that is the situation here).

[joelwoodall]

I followed your instructions, and after  answering the questions, I get this message that states,"you don't qualify for an exclusion of the gain on the sale of your home" Is there anything else besides living there for 2 out of the 5 years that determines this?

[michael-mitchell]

I had the same question. Check out this response that seemed to work. Please let me what happens. <a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/3484889-where-do-i-report-that-my-rental-was-sold-in-a-way-that-al...>

[loganmclark]

How do I handle improvements I made to the property? I replaced the HVAC system on the house after it was converted to a rental. Do I give the same answers to these questions for that under depreciation?

[janet45]

How do I handle HVAC system replaced on rental property?

[Carl]

How do I handle HVAC system replaced on rental property?

That is a property improvement that gets capitalized and depreciated over 27.5 years. Enter it in the assets/depreciation section.

If you replaced the HVAC after the last renter moved out and before you sold the property, then you're not required to depreciate it (and you don't want to either). So to avoid that, classify the HVAC as "Residential Rental Real Estate", give it an in service date of anytime after that last renter moved out and before you closed on the sale. Then enter what you paid for it both the COST box and the COST OF LAND box. Since land is not depreciable, this ensures that it will not be depreciated. But it will allow for you to account for the cost of it to increase your total cost basis in the property, as it should.