I made a $20,000 payment to a tenant in my rental property in order to get them to move so that I could sell the property. How do I account for this expense on Turbo Tax?

[ricw23]

I could not sell the property with the tenant occupying the apartment

[DianeW777 · Accepted solution]

It would be considered a selling expense. It's important for you to keep documentation and proof of your payment as well as why you had to pay to make them move.

To report the sale of your rental property use the following information. You need to dispose of the property by telling TurboTax how and when it was disposed of.  Follow the instructions below.

1. Click on Search (upper right) > type rentals > Enter > click Jump to .... link (or click the first FAQ and click Go to rentals)
2. Answer the questions and on under Rent and Royalty Summary, click Edit
3. Click Update to the right of Assets/Depreciation.
4. Click Edit to the right of each asset to be disposed of
5. Go through several screens until you get to Tell Us More About This Rental Asset
6. Click on This item was sold…….   And continue to answer the questions

You might also review information here.

Example of arriving at the selling price and sales expenses for each asset in your rental activity.

Example:  Original Cost (of each asset on your depreciation schedule)

$10,000 Land                = 13.33% 

$50,000 House              = 66.67%

$15,000 Improvements  = 20%

$75,000 Total                 = 100%

Multiply each percentage times the sales price/sales expenses to arrive at each individual sales price/sales expense.

If you have any passive loss carryforward:  The full remainder of passive loss carryover is used in the year of sale as an expense. This is combined with your overall rental gain or loss to your Form 1040. 

• When you are on the screen 'Do any of these situations apply to this property?' (Property Profile section), be sure to check the box under Carryovers. 

[ricw23]

Thanks very much for the quick answer!  The cash payment was made in December 2024 and I have all the documentation, but the rental property wasn't sold until January 2025. So do I use the $20,000 as a selling expense for the 2024 tax year?

[MinhT1 · Accepted solution]

No, not in 2024.

You deduct the $20k as a selling expense when you report the sale of your property in 2025.

[ricw23]

Thank you MinhT!