Sold a rental property in 2016 but I'm looking into filling married but separately. How do I list the sales information? Do I report the sale twice?

[PatriciaV · Accepted solution]

Yes, if you file separately from your spouse and you owned the property jointly with your spouse, you would report the sale on both separate returns.

Allocate the rental activity (income & expenses) according to the ownership (typically 50/50 for spouses). Do the same for the sale - basis, proceeds, and selling expenses.

If, however, only one of you held the property, the rental activity and property sale would be reported on the return for the owner-spouse.

The IRS rules for passive activity (including rental) may limit your ability to deduct a loss when filing separately from your spouse. If you had a net loss for the year, or on the property sale, you may wish to consult a local tax professional who may be more familiar with your specific tax situation.

Note: Married Filing Separately when you live in a community property state can be complicated. See the following for help:
https://ttlc.intuit.com/replies/3301943

[eyanjcustodio]

Thank you TurboTaxPatriciaV, this is super helpful information. When I split the  sale - basis, proceeds, and selling expenses, it appears to generate a much larger return for both of us. Should that be expected by splitting the sales information?

[PatriciaV]

It's possible that splitting the sale keeps the individual returns in a lower tax bracket than the entire sale does on the joint return.