I sold my rental house in 2024 & purchase land investment land in 2025 with the proceeds. How do I document the 1031 exchange on turbotax?

[DianeW777]

It depends. The land may not be eligible for the 1031 exchange if it is not being used for business. Double check this with your intermediary and in the meantime the details are shown in the links.

Qualified Intermediary: The identification must be in writing, signed by you and delivered to a person involved in the exchange like the seller of the replacement property or the qualified intermediary.  However, notice to your attorney, real estate agent, accountant or similar persons acting as your agent is not sufficient. 

• Where do you enter a like-kind  or Section 1031 exchange?
• IRS Fact Sheet for Section 1031 Exchange (will show the qualifying property)
• IRS Instructions for Form 8824

Boot: Any property or money you might have received that is unlike property in the exchange would be immediately subject to capital gains tax.

Depreciation Rules:

The basic concept of a 1031 exchange is that the basis of your Old Property rolls over to your New Property. In other words, if you sold your Old Property for $100,000, and bought your New Property for the same, your basis on the New Property would be the same. It makes sense then that your depreciation schedule would be exactly the same, and does not change! In other words, you continue your depreciation calculations as if you still own the Old Property (your acquisition date, cost, previous depreciation taken, and remaining un-depreciated basis remain the same).

Buy Up: 

If you 'buy up' in your exchange (your New Property cost more than you sold your Old Property), the answer is easy – you treat the buy up part as you would a new addition to an existing property. In other words, you treat the amount of the buy-up the same as you would the cost of construction, for example, of a garage added to an existing house – the cost is the amount of the buy-up; the date you start depreciating it is the date you purchased the new property; and the depreciation method you use is the method most appropriate for that type of property in the year you bought the New Property (regardless of the method you used for the original house). If you think of it this way, then it's easy, even if your property is a large office building or a more complex purchase.

[joeljennissen]

The qualified intermediary was involved as needed from the sale of the old property, handled the funds & associated paperwork, and relayed the funds on the purchased of the new investment property.  I need to know if Turbotax has the functionality to actually document this.  I've entered just about everything I need to enter, but I didn't see an option to document an exchange.  It did however calculate the taxes on the gains.

[MaryK4]

You have to enter the new asset for the new property and the Like-Kind Exchange questions will be in that section. @joeljennissen 

 

[joeljennissen]

Thanks for the info.  It helps as to how to do the path.  Imo, it'd be easier if there was a question in the selling of the investment property as to whether an exchange was completed.  Exchanges take some time and when the timelines are assessed can around seven months and still fit within the legalities of an exchange.  This means that it's quite likely that the sale & purchase would be in different tax years & may even fall outside of the filing deadlines so dealing with the exchange in the purchase of new property may or may not be the best area to have the link.  All that said, it may ultimately be better in a more complicated situation like this to pay a tax pro.