Sale of vacation home used also as a short term rental

[Carla Lloyd]

My husband and I purchased a vacation home (2nd home) 12 years ago, which we have used, but also rented (short-term rental) over the years. The business use of the house changed every year depending on the number of days we used vs rented the house. We sold the property in 2020. Where do we report the sale of the house in Turbotax? I've called the Turbotax experts twice and got 2 different answers. The first person told me to report the sale as an Investment Sale (like the sale of stock). The 2nd person told me to report it under "Sale of Business Property", since I've taken depreciation over the years. Which is correct? As I mentioned, the house was not 100% rental, we also personally used it every year. Thanks!

[AmyC · Accepted solution]

Both are right let's drill down to which is accurate for you. As a second home, you can deduct the rental depreciation taken and report it in the same place as a stock. As a rental house, you should report it as the sale of business property.

So, if it was actively rented in 2020 and a part of your return from 2019, mark the asset sold in 2020 and go through the business rental section of the program. If it is not part of your return, add up all the depreciation taken over the years and subtract it from the basis.

The IRS says:

Publication 527, Residential Rental Property (Including Rental of Vacation Homes)

Sale or Trade of Business, Depreciation, Rentals | IRS

Publication 523, Selling Your Home. page 11