I sold a rental property in 2016. Can I deduct the real estate commission? If so, where?

[MichaelDC · Accepted solution]

You would not claim a deduction. However, you can reduce the selling price of the rental property by the amount of the sales expenses, including the realtor fees. Doing this will either reduce your capital gains or increase your loss on the property, depending on your individual circumstance- either way it may reduce the amount of taxes to be paid on the sale. TurboTax will make these calculations for you, you just need to enter the data.

In TurboTax, follow these steps to enter the sale of your rental:

1. With your return open in TurboTax, search for rentals and then click the "Jump to" link in the search result.
2. Answer Yes to the question Did you have any rental or royalty income and expenses?
3. When you get to Is this a rental property or royalty? select Rental property and fill out the description, address, and owner.
4. When you hit Do any of these situations apply? you'll definitely want to check the Sold box along with any other boxes that may apply.
5. Continue following the onscreen prompts to enter info about your rental property. Eventually you'll get to the Rental Summary screen. Here, you can report the sale in the Sale of Property/Depreciation section, along with any other pertinent info (income, expenses, etc.)

Tip: Take your time and pay close attention; there's a lot of info and it's easy to miss if you're in a hurry.

Follow the prompts to enter information about the sale of your rental. As you go through the interview, these terms and definitions may be helpful:

• Sales Price – If you received a Form 1099-S, look in Box 2 (Gross Proceeds), which will generally be your contract sales price.
  • You can also use the Gross Proceeds amount from your settlement closing statement.
• Sales Expenses for selling your property include:
  • Sales commissions
  • Advertising Expenses
  • Legal Fees
  • Broker Fees
  • Transfer taxes
• Cost Basis is the rental's purchase price plus buying costs (fees you paid in connection with the purchase such as legal fees, abstract fees, survey charges, owner's title, etc.) plus improvements, minus depreciation.
• Adjusted basis is the rental's purchase price plus buying costs plus improvements plus sales expenses, minus prior-year depreciation.

[2012]

Hi. I sold my investment property in July 2019, but nowhere on Turbotax asks me about the sales price or any related transaction information.  However, Turbotax did point me to confirm (cumulative) Passive Loss Carryover amount, and after confirming the amount, federal tax due amount changed.   What am I missing here?    

[Carl]

If the investment property you sold was rental property, then you (Like billions of others) didn't read the small print is all.

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.