What is the best Turbo Tax to deal with the Sale of a rental property

[jonniewarr]

I own a home, stocks and had rental income until the sale.  Which Turbo Tax software is the best for dealing with this?

[DS30 · Accepted solution]

Yes, you can always start with the free additional and TurboTax will prompt you to upgrade depending on your particular situation. Given your circumstances, you will want to upgrade to TurboTax Premier to report your rental activities including your rental sale.

Here is some additional information about reporting your rental sale in TurboTax:

Where to enter your rental sale will depends on your rental activity during the year.

• Under the rental section - if rented during 2016
• Under the sale of business property - if not rented during 2016

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).

Click this link for further information about reporting the sale of a capital asset

To enter your rental sale under the rental section in TurboTax Online or Desktop, please follow these steps:

1. Once you are in your tax return, click on the “Federal Taxes” tab ("Business" tab in TurboTax Home & Business)
2. Next click on “Wages & Income” ("Business Income and Expense" in TurboTax Home & Business)
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 “Rental Properties and Royalties”
5. Choose “Rental Properties and Royalties” and select “start’ (or “update” is you have already worked on this section)
6. If your rental property is listed, you will need to select "edit" to access this information. Otherwise enter your rental property information. (If you are entering your rental information for the first time, you will need to add the rental house as an asset under step 16)
7. Is This a Rental Property or Royalty? - choose rental and put rental information and address
8. What Type of Rental is This? - choose rental type (ie: Single family (home or unit where a single family lives))
9. Do Any of These Situations Apply to This Property? - select sold
10. Was This Property Rented for All of 2016? - answer questions based on your circumstances
11. Property Ownership - select your ownership percentage
12. Indicate if you Actively Participate - yes or no (If yes, this allows some of the passive losses to be used against passive income)
13. Did You Pay Anyone $600 or More for Work Related to This Property? - yes or no
14. Is Your Property in Any of These Designated Areas? - Usually "none of the above"
15. Review Your Rental Property Rental Summary
16. Select Sale of Property/ Depreciation section. Here is some additional information you will need to select under the sale of property section: 
1. About 3 screens in, if the house is listed under this section, you will select that you want to edit this property
2. About 4 screens more, check box that you sold the property under "Tell us about this rental asset"
3. For the special handling screen - say "no" (Please note that if you used FMV at the time of conversion to a rental for your depreciation (as opposed to adjusted basis), you will want to answer "yes" here and enter the sale under the sale of business property section (see below).)
4. Home Sale - select "yes" if sale of main home.
5. Sales Information - enter the sales price information  You will need to allocate the net sales proceeds into asset sale and land sale. If your proceeds are not allocated, you can use the same percentage of asset and land from the original purchase for the sales proceeds allocation

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
1. Description - address of property
2. Date acquired - original acquisition date
3. Date sold - date of sale (should be on 1099-S)
4. Total sales price - total sales price (should be listed on 1099-S)
5. Cost of property (or tax basis) plus expenses of sales - original cost plus any capital improvements plus expenses of sales
6. Depreciation taken on this property - total depreciation taken property when rental (Please note the IRS will assume that you have taken the correct depreciation on your rental property while your property was available for rent regardless of whether you have actually take it or not)
9. What type of property is this? - select - Rental estate that I took depreciation on.
10. Installment sales - no if not on installment sale
11. 2 screens that show the summary of what you have entered for your property sale
12. Sale of Other Business Property - Choose yes if any of these situation apply, otherwise choose no.
1. You sold property that cannot be depreciated such as vacant land, mineral rights or inventory
2. You sold business or rental property that you owed for one year or less
3. You sold business or rental property at a loss.
13. Total Gross Proceeds - enter your 1099-S sales information here (this could be the same amount that was reported earlier as sales price)

[Stevenbirn]

I am having an issue with the sale of my rental condo and saw your posting.  I have had the condo for over 30 years and just sold it.  I followed your steps for rental sale under the rental section.  The only problem is it does not reflect depreciation in the net gain.  But it seems to work when I use rental section, without putting in the date of sale, and then put it under the sale of business property.  I assume it should work all under the rental section.  Any idea why it does not reflect depreciation?  Thank you

[Carl]

The same version you've been using to report the rental income/expenses with in the past, will do just fine.

Reporting the Sale of Rental Property

If you qualify for the "lived in 2 of last 5 years" capital gains exclusion, then when prompted you WILL indicate that this sale DOES INCLUDE the sale of your main home. For AD MIL personnel who don't qualify because of PCS orders, select this option anyway, because you "MIGHT" qualify for at last a partial exclusion.

Start working through Rental & Royalty Income (SCH E) "AS IF" you did not sell the property. One of the screens near the start will have a selection on it for "I sold or otherwise disposed of this property in  2019". Select it. After you select the "I sold or otherwise disposed of this property in 2019" you continue working it through "as if" you still own it. When you come to the summary screen you will enter all of your rental income and expenses, even it it's zero. Then you MUST work through the "Sale of Assets/Depreciation" section. You must work through each individual asset one at a time to report its disposition (in your case, all your rental assets were sold).

Understand that if more than the property itself is listed in your assets list, then you need to allocate your sales price across all of your assets.  You will only allocate the structure sales price; you will NOT allocate the land sales price, since the land is not a depreciable asset.  Then if you sold this rental at a gain, you must show a gain on all assets, even if that gain is $1. Likewise, if you sold at a loss then you must show a loss on all assets, even if that loss is $1

Basically, when working through an asset you select the option for "I stopped using this asset in 2019" and go from there. Note that you MUST do this for EACH AND EVERY asset listed.

When you finish working through everything listed in the assets section, if you ever at any time you owned this rental you claimed vehicle expenses, then you must also work through the vehicle section and show the disposition of the vehicle. Most likely, your vehicle disposition will be "removed for personal use", as I seriously doubt you sold your vehicle as a part of this rental sale.

[Stevenbirn]

Thank you for your response.  Do I need to work through the assets that are fully depreciated?  Can I just use a price of $1 each?

[SusanY1]

You do need to work through the assets if you disposed of them in this year.  Prior depreciation is treated differently on the tax return for many assets, so simply listing the asset value at $1 will not result in the proper calculation.

@Stevenbirn