Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
rockinlikedokken
New Member

If I rented out my townhouse for 7 years and decided to sell in 2017, is it a rental property or personal home? It was not being used while on the market for 6 months.

 
1 Best answer

Accepted Solutions
Coleen3
Intuit Alumni

If I rented out my townhouse for 7 years and decided to sell in 2017, is it a rental property or personal home? It was not being used while on the market for 6 months.

It is rental property. For it to be also considered personal, you would have had to live in the for 2 of the last 5 years as of the date of sale. Since it was not rented in 2018, you will have to enter it in Sales of Business Property.

To this rental sale under the sale of a business property in TurboTax Online or Desktop, please follow these steps:

 

  1. Once you are in your tax return, click on the “Business" tab ("Federal Taxes" tab in Premier)
  2. Next click on “Business Income and Expense" ("Wages and Income" tab in Premier)
  3. Next click on “I’ll choose what I work on” (Jump to full list)
  4. Scroll down the screen until to come to the section “Less Common Business Situations” ("Business Items" in Premier)
  5. Choose “Sale of Business Property” and select “start’
  6. Select "Sale of business or rental property that you haven't already reported"
  7. Sale of Business or Rental Property - yes
  8. Enter all the information about your Rental Property Sale here
  9. What type of property is this? - select - Rental estate that I took depreciation on.

 

Additionally, when you sell a property that was used as a rental, you must pay 25 percent recapture tax (also referred to as Section 1250 recapture) as well as regular state income tax on the depreciation you claimed. (Remember the IRS will assume that you claimed the correct amount of depreciation every year—this is true regardless of whether you actually claimed any depreciation on your tax return).

In order to calculate the capital gain or loss when you sell a residence that had been converted to rental property, you need to know three things:

  • Your adjusted tax basis in the property (both at the time of the conversion and the time of the sale)
  • The sale price
  • The fair market value of the property when it was converted to rental property

If the converted property is later sold at a gain, the basis for purposes of determining the capital gain is your adjusted tax basis in the property at the time of the sale. If the sale results in a loss, however, the basis used is the lower of the property's adjusted tax basis at the time of the conversion or the fair market value when the property was converted from personal use to rental property. This loss rule ensures that any deflation in value occurring while the property was held as a principal residence does not later become deductible upon your sale of the rental property; a loss on the sale of a principal residence is not deductible. As usual, you calculate your capital gain by subtracting your adjusted basis from the sale price of the property.

 

 

View solution in original post

1 Reply
Coleen3
Intuit Alumni

If I rented out my townhouse for 7 years and decided to sell in 2017, is it a rental property or personal home? It was not being used while on the market for 6 months.

It is rental property. For it to be also considered personal, you would have had to live in the for 2 of the last 5 years as of the date of sale. Since it was not rented in 2018, you will have to enter it in Sales of Business Property.

To this rental sale under the sale of a business property in TurboTax Online or Desktop, please follow these steps:

 

  1. Once you are in your tax return, click on the “Business" tab ("Federal Taxes" tab in Premier)
  2. Next click on “Business Income and Expense" ("Wages and Income" tab in Premier)
  3. Next click on “I’ll choose what I work on” (Jump to full list)
  4. Scroll down the screen until to come to the section “Less Common Business Situations” ("Business Items" in Premier)
  5. Choose “Sale of Business Property” and select “start’
  6. Select "Sale of business or rental property that you haven't already reported"
  7. Sale of Business or Rental Property - yes
  8. Enter all the information about your Rental Property Sale here
  9. What type of property is this? - select - Rental estate that I took depreciation on.

 

Additionally, when you sell a property that was used as a rental, you must pay 25 percent recapture tax (also referred to as Section 1250 recapture) as well as regular state income tax on the depreciation you claimed. (Remember the IRS will assume that you claimed the correct amount of depreciation every year—this is true regardless of whether you actually claimed any depreciation on your tax return).

In order to calculate the capital gain or loss when you sell a residence that had been converted to rental property, you need to know three things:

  • Your adjusted tax basis in the property (both at the time of the conversion and the time of the sale)
  • The sale price
  • The fair market value of the property when it was converted to rental property

If the converted property is later sold at a gain, the basis for purposes of determining the capital gain is your adjusted tax basis in the property at the time of the sale. If the sale results in a loss, however, the basis used is the lower of the property's adjusted tax basis at the time of the conversion or the fair market value when the property was converted from personal use to rental property. This loss rule ensures that any deflation in value occurring while the property was held as a principal residence does not later become deductible upon your sale of the rental property; a loss on the sale of a principal residence is not deductible. As usual, you calculate your capital gain by subtracting your adjusted basis from the sale price of the property.

 

 

Dynamic AdsDynamic Ads
Privacy Settings
v