Just sold a rental property that I owned for 10 years. Can I deduct the realtors commission/fee's from the capital gain?

[ColeenD3]

Yes. There are other closing costs that are also added to the basis of the property, resulting in a lower capital gain. See the list below.

• Title fees
• real estate commissions
• documentary stamps
• credit report costs
• costs of an abstract
• transfer taxes
• home inspection
• flood certificate
• attorney fees

[Edited 3/2/21 9:50AM EST]

[XLS-Pilot]

I also sold a rental property in 2020. I purchased it in 1998 and lived there until I turned it into a rental in 2010. Where are these items added in turbotax specifically? Are they simply expenses in the rental section when determining profit/loss for the year or somewhere else? There is a section I filled out because I sold my property but turbotax doesn't ask about expenses like Real estate commissions.

[JeffreyR77]

Expenses that have not be allowed to be currently deductible during the life of an asset have been added to the asset's basis. 

That basis will be what is used to calculate capital gain upon disposition of the asset. 

Expenses of sale include real estate commissions and those other closing costs @ColeenD3 has listed. 

TurboTax does ask for expenses of sale when going through the asset disposition interview screens:

Clicking on Explain This will provide further information on what expenses are often included in these areas. 

[ColeenD3]

You asked, "Are they simply expenses in the rental section when determining profit/loss for the year or somewhere else?"

Rental expenses are the same ones that you would deduct each year for the production of income. Sales expenses are different. These are the ones, mentioned above, that are paid at the time of sale. They are totally different expenses.

As stated, they are added to the basis of the property reducing your gain. You would prorate the expense between the land and the building. If the land is 20% of the total amount, allocate 20% of the sales expenses to the land.

[XLS-Pilot]

I have Turbotax Premier and I don't have that screen you displayed. I have "Tell us about this rental asset" Cost and Cost of land. I put in the cost of land but then it just gets backed out later. When I put in the sales price, do I need to distribute that to  the land, even thought none of the sale is attributed to the land? This is so confusing and not easy in Turbotax.

[XLS-Pilot]

And also, the "Cost", is that just the purchase price? What about all the money I spent updating the house the 10 years I lived there prior to making it a rental?

[ReneeM7122]

The cost of updating a home is added to the cost basis.  The cost basis is, as you said, the purchase price plus the cost of improvements.  While it isn't a tax deduction, improvements are subtracted from the proceeds of the sale.   This reduces the amount of tax you pay.

Here is a TurboTax article that explains home improvements and the sale of your home.

@XLS-Pilot

[XLS-Pilot]

Thanks for the response. On my form 4797 Part 3, why is my cost basis different from what I put in Turbotax? What I put in as the cost shows on my 4797 Part III line 21 as substantially less. 

I sure wish there was somebody at TT that I could call on this.

[JohnB5677]

There is depreciation recapture.  As you took the deduction for depreciation it reduced your cost basis. 

The real sticker is that you have to take a recapture of all of the depreciation whether you originally took it or not. 

If you did not take it you will be able to amend your returns going back 3 years.  You can still do 2017 up until April 15th 2020.