I just sold my rental property at a profit. What steps can I take this year to mitigate my overall tax liability when I file my 2020 taxes?
Also, do I have to pay estimated taxes this year for 2020?
What you do with the proceeds/gain from the sale does not matter. If it's taxable, you pay taxes on it. Period. However, if the property was your *PRIMARY* residence for two of the last five years you owned it, counting back from the closing date of the sale, then you may be eligible for the $250K capital gains tax exclusion. ($500K if married filing joint.)
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.
do I have to pay estimated taxes this year for 2020?
If you sold at a gain, then I would highly recommend you go ahead and send the IRS 20% of that gain "right now" so you don't have to deal with the additional paperwork it "will" create next year at tax time if you don't. You can do that at http://www.irs.gov/payments. Also, if your state taxes personal income you would want to send your state their percentage equal to whatever they tax your personal income at.