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myhanhsj
New Member

Rental property selling expenses

For rental property sold during 2016, I was required to replace the septic system. This was a substantial cost (~$40,000). I also had to replace other plumbing and heating items. Where is the form for 'selling expenses' found? I tried the search feature, but has NO links. There is no 'jump to' button. No 'selling expenses' form comes up while entering info.


1 Best answer

Accepted Solutions
MinhT
Expert Alumni

Rental property selling expenses

The costs of replacing the septic system, plumbing and heating items are not strictly speaking selling expenses. They are added to the cost basis of your home.

For your information:

Sales expenses include:

 - commissions
 - appraisal fees
 - broker's fees
 - legal fees
 - advertising fees
 - home inspection reports
 - title insurance
 - transfer taxes or fees
 - geological surveys
 - loan charges (points) or other fees paid on the buyer's behalf

Sales expenses do not include:
 - mortgage payoffs
 - home equity loan payoffs
 - rent-back costs
 - payoff to creditors
 - property taxes
 - homeowners' association fees

In TurboTax, selling expenses are not entered separately from the cost basis. They are added to the cost basis and entered as a lump sum (see attached screenshot),



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4 Replies
MinhT
Expert Alumni

Rental property selling expenses

The costs of replacing the septic system, plumbing and heating items are not strictly speaking selling expenses. They are added to the cost basis of your home.

For your information:

Sales expenses include:

 - commissions
 - appraisal fees
 - broker's fees
 - legal fees
 - advertising fees
 - home inspection reports
 - title insurance
 - transfer taxes or fees
 - geological surveys
 - loan charges (points) or other fees paid on the buyer's behalf

Sales expenses do not include:
 - mortgage payoffs
 - home equity loan payoffs
 - rent-back costs
 - payoff to creditors
 - property taxes
 - homeowners' association fees

In TurboTax, selling expenses are not entered separately from the cost basis. They are added to the cost basis and entered as a lump sum (see attached screenshot),



**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

View solution in original post

rftax815
New Member

Rental property selling expenses

Rental property is in NY.  Client lives in GA. Can you deduct estimated NYS taxes as a selling expense on the sale of rental property

Carl
Level 15

Rental property selling expenses

Can you deduct estimated NYS taxes as a selling expense on the sale of rental property

No. You claim only the "actual" taxes that you can prove you paid. Estimates don't play into this.

Carl
Level 15

Rental property selling expenses

The new septic system, plumbing and heating are not "selling expenses" by any stretch of the imagination. They are property improvements and add value to the property without question.

You will enter your property improvements in the Assets/Depreciation section of the program. Assuming this was all done after the last renter moved out, and prior to closing on the sale, you will *NOT* depreciate these improvements. That's because they were never placed "in service" as a rental asset.

When entering the asset (you can group them all together so you only have to make one single entry)  your business use percentage will be ZERO PERCENT.

Now if the program *insist* it must be greater than zero percent business use, just enter 1% business use and make the "in service" date the closing date of the sale. That way, if any depreciation is taken it will be minimal. But more than likely no depreciation will be taken at all this way.

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.

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