Points paid on the buyer’s behalf. Line 802.
Only the amount listed in the “paid from seller’s funds at settlement” column.
But special note here. If there is
an amount on line 803 in the “paid from sellers funds at settlement” column,
then you will use that amount, instead of the amount on line 802 in the “paid
from sellers funds at settlement” column.
Add together all of the items above, then write down the
total and label it “Sales Expenses”.
Date Bought or Acquired – This is the date on the HUD-1
statement you received when you originally purchased
the property.
Adjusted Cost Basis: This figure includes what you
originally paid for the property, and what you paid for any property
improvements you made at any time after you purchased it. It does not matter if
you paid for these improvements while the property was a rental, or while it
was not a rental. First, we’ll get the original purchase price. Then I will
tell you how to get the cost of your property improvements.
Your original purchase price is on the HUD-1 statement
you received when you originally purchased the property. Line 120.
How you get your cost of property improvements depends on
the status or classification of the property on last year’s tax return, as well
as the year before that. So pick the one below that applies to you.
If you reported on a tax return PRIOR TO LAST YEAR’S
RETURN that you converted this property to personal use, go to Scenario 2.
Otherwise, continue on from here with Scenario 1.
Scenario 1
To get the cost of your property improvements if you DID
report this property on a SCH E on last year’s tax return:
When you started
this year’s tax return, I assume you imported from last year’s tax return. If
so, then what we need is already in the TurboTax program. But it’s not where we
need it to be. Note that you will be writing figures down. If you have any
rental income/expenses to report for this property, you will do that at this
time also. If this property was NOT classified as a rental on Jan 1st
last year, then you will NOT change anything in the program at this point. So
here we go.
For Turbotax Home
& Business, select the business tab, then “I will choose what to work
on”, then elect to start/update Rental Properties & Royalties
For all other
versions of TurboTax under the Wages & Income tab scroll down and elect
to start/update Rentals & Royalites.
Now work through this rental property “as if” you still
own it, making the proper selections and entering required information as
necessary.
On the screen titled “Do Any Of These Situations Apply To
This Property”, select the option for “I sold or otherwise disposed of this
property in 2014”, then Continue.
On the screen titled “Review Your <propertyname>
Rental Summary”, if you have any rental income/expenses to report, do so. Then
elect to start/update “Sale of Property/Depreciation”.
Now you see the list of assets/property improvements that
you paid for, since you purchased this property. At an absolute minimum, this
list will have one item listed, and that item will be the actual entire
property itself. You wil NOT NOT NOT include the value of this item, because
the value of this item is the original purchase price. {You already have that
price written down, right?)
If the property itself is the only item in this list,
then you do not have any property improvements, and your “Adjusted Cost Basis”
is what you paid for the property, and that’s it. Scroll down to “End of
Section 2” to continue.
So starting with the one listed after the property
itself, click the EDIT button for that asset.
Now write down the name of that asset, and the cost (what
you paid for it). Note that I expect this cost to be what you actually paid for
it, and not the Fair Market Value (FMV). If it’s the FMV, then you do not want
this number. You want to write down what you actually paid for it.
Click the Back button, and do the same for each asset in
the list, until you have the name and cost of each asset written down.
Remember, DO NOT NOT NOT include the cost of the entire property itself, that’s
in that list of assets.
When you are finished writing down each asset and its
cost, click the Done button. This puts you back to the “Your
<propertyname> Rental Summary” screen.
Now continue working through this rental property “as if” you still own
it, until you are returned to the “Rental and Royalty Summary” screen.
Now take all those costs and add them up. Add that total
to your original purchase price (line 120 of the HUD-1 you got when you
purchased the property) and that is your final Adjusted Cost Basis. Write that
down, and label that amount “Adjusted Cost Basis” Scroll down to “End of
Section 2” to continue.
Scenario 2
If you converted this property to personal use two or
more years ago, then most likely, the property is not listed on the tax return
you are working on right now, as it was not imported from last year’s TurboTax
file. Therefore, you will need to locate the tax return of the year you
converted this property from rental, to personal use. It could be the hard copy
you printed, or the PDF file that you saved. Either is fine.
What you are looking for, is the IRS Form 4562. If you
did a printout or PDF save of *everything* for that specific tax return, then
you will find three, IRS Form 4562’s that relate to this specific property. One
of the forms is printed in portrait format, and the other two in landscape
format. You want the one in landscape format that’s titled “Depreciation and
Amortization Report”
On the very first line under the Asset Description
column, is the word “Depreciation”. Under this each of your property
improvements is listed.
If you EVER refinanced this property while you owned it,
then after the list of property improvements you see the word “Amortization” in
that same Asset Description Column. For this part, you will NOT include any of
the entries under the “Amortization” line.
At an absolute minimum, there will be a listing for the
property itself. If that is the only thing listed on this paper, then you don’t
need it. You already have the cost of the property itself (what you paid for it)
from line 120 of the HUD-1 you received when you originally purchased it. So if
this is your case, go to “END OF SECTION 2” and continue from there.
With one exception, you will add up all the cost of all
of the items under “Depreciation” and above “Amortization”. You will NOT NOT
NOT include the cost of the property itself. Add together all the amounts
listed in the column titled “Cost (Net of Land). Remember; do not include the
cost of the property itself. Write down this total and label it “Property Improvements”.
Now, if you ever refinanced this property at any time you
owned it, those refinancing fees that you paid are identified under the
“Amortization” entry in the Asset Description column. Below that, in the Asset Description column
after the refinancing fees that are listed, is a line labeled “TOTALS”. This is
the total of all the refinancing fees you have paid for every time you’ve
refinanced this property. The total is listed on that line, in the column
labeled “Cost (Net of Land). Write this total down and label it “Refi Fees”.
Now, add together your original purchase price (line 120
of the HUD-1 received when you originally purchased this property) property
improvement costs, and Refi Fees. Write down that total and label it “Adjusted
Cost Basis”.
END OF
SCENARIO 2
Now that you have all the figures you can begin entering
required information in the TurboTax program.
For TurboTax Home
& Business select the Personal tab and on the left, select Personal
Income. Then click “I’ll choose what to work on”. Scroll down to the Less
Common Income section and under that elect to start/update Sale of Home (Gain
or Loss)
For all other
versions of TurboTax, under the Wages & Income tab select “I’ll choose
what to work on” and scroll down to the Less Common Income section and under
that elect to start/update Sale of Home (Gain or Loss).
Select Yes.
Select Continue.
Select the property owner(s) and enter the property
address, then Continue.
From the information gathered previously, enter Date
Sold, the Selling Price, your Sales Expenses and Continue.
Enter your purchase date. This is the date on the HUD-1
you received at the closing when YOU PURCHASED IT.
For the Adjusted Cost Basis entry, you should have this
written down, and if you labeled it the way I said, you have that figure. Enter it, and then Continue.
For the next screen (next two screens if owned by married
couple) I expect you to be selecting YES, since you are claiming you lived in
the house for at least 24 months of the last 60 months prior to the date you
sold the property. Those 24 months do not have to be consecutive.
You should now be on the screen titled “Did you use this
home for anything other than your
primary home?”. The information on this screen can be very, very confusing
causing you to make an incorrect selection. So pay attention. This screen has
nothing to do with the “two of last five years” exclusion rules. (You qualified
for the exclusion on previous screens.)
