I have a rental property that I have been deprecating for four years. This year I sold the property for a loss. How do I account for this?

[stephie620]

I have previously used a tax firm to do my taxes.  They calculated the basis of the property at $96K and the land at $10K.  Previous depreciation is 10,700 brining the revised basis down to $84K.  I sold the property in July for $77K. 

How do I calculate the loss? 

Can I count closing costs in the amount? 

And do I need to calculate depreciation on the portion of the year that the property was rented?

Does this loss offset my income; or only offset capital gains?

[IreneS · Accepted solution]

You can report the sale of the rental property in the rental property section -- TurboTax will walk you through the steps.

• How do I calculate the loss?  TurboTax will ask you for information and calculate the loss for you.

• Closing costs are added to the basis of the property

• And do I need to calculate depreciation on the portion of the year that the property was rented?  Again, TurboTax will take care of this for you.

• Does this loss offset my income; or only offset capital gains?  This is a capital loss, which is first applied against any capital gains in the return.  After that, you are allow to take $3,000 of the loss per year.  The rest is carried forward.

Rental properties are reported on Schedule E - Supplemental Income.  You will have to apportion the total sales price among the house and any assets that may have been entered separately (for example new roof, appliances, improvements).

To do this in TurboTax Premier (Windows), please follow these steps:

1. Click on Federal Taxes > Continue > I'll choose what I work on.
2. On the screen, Your 20XX Income Summary, in the Rental Properties and Royalties section, click the Start/Update box.  
3. On the Income from Rentals or Royalty Property You Own  screen, click Yes.
4. If you have already entered information about your rental (or transferred it from the previous year), you will come to the Rental and Royalty Summary screen.  Click on the Edit box next to the property. 
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 2019. 
8. On the screen, Was this Property Rented for All of 2019? mark the Yes button if it was rented the entire time you owned it.  [You will come to a screen later on to enter the sales information.]
9. When you come to the screen, Review Your [XX] Rental Summary click the Start/Update box next to Sale of Property/Depreciation. 
10. 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.
11. Click Edit next to the property.
12. If you haven't yet entered any assets, continue through the screens to enter the house.
13. 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. 
    
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 Edit on an existing asset [or Add an Asset].