Sold a second home with a rental unit in 2018.

[2018terrycindyta]

Purchased 2nd home in 2001 for $120,000.  Had a garage with rental unit above it constructed in 2004 for $80,000.   Rented the unit every year since and depreciated it.  I have made many improvements to rental and house.  Total costs is $280,000.  Sold it on 11/15/2018 for $267,000.  Net proceeds $251,000.  Rented the house with Airbnb for last 2 years.  Entered in TurboTax as a vacation with short term rental.  Really need TurboTax's help with this one.  How do I enter the sale of the rental and house in TurboTax? 

[Leonard]

To enter the sale information of your rental property using TurboTax Deluxe enter sale of business property in the find box and then click on Jump to sale of business property in the results box.  Follow the program prompts to enter your sales information.

[jwright310]

We have been self filing via Turbo Tax beginning in 2018. We bought a mountain condo in 2018.  We bought it to take money out of the stock markets and invest it in income producing residential real estate.  A successful endeavor it turns out. We rented it out as a series of short term rentals over several years.  We have depreciated it and used it for personal purposes a little.   We stopped renting it out on Oct , 22,2022 and put it up for sale.  We sold and closed on December 2, 2022.  I am lost on how to report the use, rental income, expenses and the sale of the property.   I have PAL carryforwards and we did have a gain on sale.  Help please.  Thank you.  

I am willing to pay Turbo Tax for the use of a expert but cannot figure out how as our return is complete except for the issues listed above.  John Wright

[Carl]

If you report the sale in the Rental & Royalty (SCH E) section of the program, where you have been reporting the income and expenses, the program (not you) will handle depreciation recapture for you. I'm not sure, but I think it will also deal with the PAL carryover's too.

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  2022". Select it. After you select the "I sold or otherwise disposed of this property in 2022" 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 if it's zero. Then you MUST work through the "Sale of Property/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 on some assets. Likewise, if you sold at a loss then you must show a loss on all assets, even if that loss is $1 on some assets.

Basically, when working through an asset you select the option for "I stopped using this asset in 2022" 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.

[Anonymous_]

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@jwright310 wrote:

I am willing to pay Turbo Tax for the use of a expert but cannot figure out how as our return is complete except for the issues listed above.  

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You can use TurboTax Live (if you are using an online version of TurboTax) or Full Service.

See https://turbotax.intuit.com/personal-taxes/online/live

If you used TurboTax for the 2021 tax year, your suspended PALs should have carried over to 2022 if you transferred your 2021 return into the 2022 program. If they did not, you can enter the figure manually.

In the Property Profile subsection:

[AbrahamT]

As @Carl mentioned above, there are situations like Passive Activity Loss and depreciation recapture which goes into the calculation of entering the sale of a property. The program should prompt you as to where to enter the information inorder to correctly take all this into account. The easiest way to go about this is To enter the sale of your rental property in TurboTax follow these steps.

1. With TurboTax open enter sale of rental property in the search box.
2. Select Jump to sale of rental property in the results window just below the search box.
3. Follow the prompts to enter your rental sale information.

If there is anything in particular that you need to know regarding the input or the calculations that you need more clarification on?