I have lived in my home on 5.25 acres for over 25 years. I recently divided and sold the back portion of my property. I am owner financing to be paid off within a year. I am not sure how to go about using the original costs of the property - example
Purchased property 40,000
Fenced entire property 30,000
Land clearing ect 60,000
Can I take half of what i spent on the original 5.25 acres and write it off for selling half of the property - so write off half of the purchase, fence and land clearing? Then use the other half to write off when and if I ever sell the portion with the house on it?
Also I am owner financing at 0% interest as they are paying it off so fast - how would that work with the IRS for taxes as there is not interest.
Thank you
You'll need to sign in or create an account to connect with an expert.
Are you selling half of the lot? When you bought the home was the house on it? Your cost basis for the property would only apply to the portion of the property you are selling minus the house.
If you bought the house and land and you are just selling land, then you would need to get the cost of the land without the house then and now. So if in 2000 you paid $200,000 for land and property and on your property taxes the land was valued at $20,000 and your improvements were valued at $180,000, then only 10% of the value was in the property. If you sold half of the land, then you can claim $10,000 as the cost of the property.
Are you selling the fenced area to them? If not, this is an improvement that would not be part of the cost of the land. So you would not add include it in the cost.
The land clearing would be part of the cost of the land.
You will report it as an installment sale without claiming any interest. If the sale and all payments are being made in 2024, you would simply treat it as a sale. If the initial payments were made in 2023, then you would include in your income the amount that was received in 2023 on the 2023 return and then what you receive in 24 in your 2024 return.
To enter this sale in TurboTax you will select the following:
Still have questions?
Make a postAsk questions and learn more about your taxes and finances.
frank790628
Level 1
kgraghu
Level 3
angel888
Level 3
paulthakur
New Member
mftempleton
Returning Member
Did the information on this page answer your question?
You have clicked a link to a site outside of the TurboTax Community. By clicking "Continue", you will leave the Community and be taken to that site instead.