Are all fixing up expenses entered in the same place when you sell a rental property?

[RaineB]

I sold a rental in 2023. I entered expenses like a new HVAC system and new flooring in the “Your Property Assets” section, which comes up after you select “Sold rental property”? (With information from other answers here, I was able to enter them so that no depreciation would be taken.) Are these expenses added to my basis? I think they should be, but can’t see yet where that happens.

But what about softer items like painting, window repair, duct cleaning, yard work, cleaning of the house etc. These were all expenses connected with the sale, also done after the last tenant moved out. Can these expenses be entered in “Your Property Assets”? Or do I enter them in the normal "Expenses" section connected to actually renting the place? That seems like mixing two different things, but these items also don't seem like "assets."

Also, In the “Sales Information” section, TT asks you to allocate the sales price and expenses between the house and the land. I used a 75-25 percent split. What is included in expenses in this section? Obviously commission I paid on selling, title owner’s insurance, title fees, and things along those lines. Anything else? 

Thanks!

[MarilynG1]

Any improvements or repairs you did to the property after the last renter moved out are no longer considered 'Rental Expenses' or 'Rental Assets' so are not entered in that section. 

However, you are correct that the major improvements can be added to the Cost Basis, and the other smaller repairs could be added as 'Sales Expenses', along with commission, title fees, etc.

10 deductible selling expenses for rental property

• Real estate commission. ...
• Marketing and advertising expenses. ...
• Repairs and maintenance. ...
• Owner's title insurance policy. ...
• Transfer taxes. ...
• Deed recording fees. ...
• Other closing costs. ...
• Home warranty costs.

[RaineB]

An additional thought: I could enter this sale separately from the Schedule E. So when it asks if I sold the rental, I say no. Then I go to "Sale of Business Property" and enter the sale there, adding all my fixing-up expenses directly to my basis. Would that work? 

[PatriciaV]

You do need to "sell" all assets for your Rental Property. Otherwise, they will still be on Schedule E next year. That is the main reason for reporting the sale under Rental Properties rather than the Sale of Business Property.

If the property was available to be rented while you made repairs (even if you had listed the property for sale), you would report those costs (including mortgage interest) under Rental Expenses.

However, if the property was not available to be rented (or you had no plans to rent it again), any repair costs you incurred before you listed the property increase the basis of the property and reduce any gain on the sale. 

Any repairs needed in order to close the sale may be included in Selling Expenses.

Compare the outcome of each treatment before you decide where to report the repair costs:

Sales price

Less: Adjusted Basis in Assets (net of depreciation)

Less: Selling Expenses

= Capital Gain/Loss

Rental Income

Less: Rental Expenses

= Ordinary Gain/Loss