I sold my vacant rental property in 2/2021. I made capital improvements in 1/2021. Where do I add their cost? Do I add to the cost basis transferred from 2020 return?

No, don't add the January capital improvements to your cost basis. Enter each of the capital improvements as an asset. For the Date purchased or acquired, enter the sale date (February 2021).

 

Please see my previous post on how to enter the sale of a rental. Click here. 

 

Some items to remember as you enter your rental sale:

• You have to indicate you sold the rental property in both the Property Profile section and the Assets/Depreciation section of the program. You will be prompted to enter sales information during the interview in the Assets/Depreciation section of TurboTax. 
• Closing costs are considered  expense of sale and this reduces the gain or increases a loss on the sale. TurboTax will ask you about the expense of sale.  Examples are commissions, transfer tax, recording fees, etc.

This does not help me.  I know how to enter the sales information for the rental.  However, if I add an asset (heating system) there are a series of questions that follow in the screens.  It asks me about the sales price of the asset; date it was sold,  The sales price and the expenses.  I don't know what to put in.  Is the sales price of the asset (the heating system) the same price I paid for it?  It also asks me to allocate my expenses.  Not sure what I do here. 

You have a choice to allocate the sales proceeds between the rental property and the new HVAC or to report zero sales proceeds for the HVAC. Either way, report only the actual total proceeds you received. Selling expenses would be handled the same way.

Thanks

A few questions:

1. All capital improvements should be in the 'Your Property Assets' screen? 

2. Should I mark the capital improvements as 'Sold' on the same date that the rental property was sold?

3. If yes above, can I just put 0 for the sales proceeds and expenses?

 

Thank you.

 

Capital improvements are added to the basis of your vacant land.

 

To report the sale of your vacant land in TurboTax follow these steps:

1. Open or continue your return
2. In the search box, enter sold second home 
3. Click on Jump to sold second home in the results box
4. On the page Did you sell any of these investments in 2021?  Answer yes
5. On the page OK, let's start with one investment type check the Box for other
6. On the page Tell us more about this sale enter “sale of vacant land” in the Name box
7. Answer all the questions on the page Now, enter one sale for sale of vacant land Enter the gross 1099-S in the Proceeds box and your basis in the Total amount paid box
8. On the page Let us know if any of these situations apply to this sale check the box you paid expenses and enter your sale expenses
9. Continue to the page Your investment sales summary where you will see your Total gain if any on the sale of your vacant home.

 

Vacant land not used for investments purposes is personal use of a capital asset. A gain on the sale is reportable income, but a loss is NOT deductible

 

This link Where do I enter the sale of a second home, an inherited home, or land on my 2021 taxes? has information you may find useful.