Sold my out of state rental property

[tgfathergoose]

I sold an out of state rental property in 2019, and I am totally confused on how to fill out TurboTax. I'm supposed to split the property between the house and land? Allocating sales expenses? I know I'm doing something wrong, because all of a sudden I jumped from a refund of about $4k to owing $14k. Are there detailed instructions anywhere on what to do? And yes, the title company held back money from settlement to make sure I filed taxes with the state where the property is, so I have to fill out that state's tax form, too.

[Carl]

The below guidance applies to your federal return. What state the property was in doesn't matter either. As for how useful the below guidance will be on your non-resident state return, I honestly haven't got a clue. But since pertinent data from the federal return is carried over by the program to whatever state return you're filing, I would expect it to help simplify things dramatically.

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 ahve 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.

[RobertG]

You need to allocate the sales price between land and improvement value because land does not depreciate.  

Generally, when you set up depreciation for the property you allocate part of the purchase price to land value and depreciate the rest.

If 30% of the purchase price was for land, then 30% of the sale price can be for land.  It should not affect the taxable gain.

If it was rental property at any time in 2019, you should report it as the sale of a rental property. Otherwise, you report the sale in the "sale of business property" section.

If it was a rental property in 2019, when you enter it as a rental 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 enter all of the rental information, it will ask you about the sale.

If it was not a rental property in 2019, report the sale in the "sale of business property" section.

[asamuels1]

So my case is similar to the original question except the sale of my rental property was in Florida-and I am a Minnesota resident. Turbo tax now tries to tax me in MN on my 40k gain (none is Minnesota related as 100% of the property, rental income, advertising etc was always done strictly in Florida).

I believe there is no tax in Florida for this transaction but is it right that MN taxes my gain on this (I see no MN state adjustment for this gain from the federal income)? 

[AmyC]

Your resident state taxes all income received while a resident. A resident state WILL give you credit for any other state taxes paid. So, if your rental had been over a state in AL, then you would file an AL return and MN would give you a credit. Since FL, no state credit and MN gets it all.

@asamuels1

[OSNAnIC964282]

i  need to know if I am required to allocate part ot the Capital Gain on the sale of a rental property  sold on Aug 08 2024.  The rental property is located in the State of MIssouri.   In 2024 I lived and worked in the state of Missouri until June 12 2024.  Do I need to allocate a portion of the capital gains on the sale of the rental property to MA since I technically relocated there on June 12, 2024.  Please inform.

[DavidD66]

If you were a Massachusetts (MA) resident at the time you sold the property any gain on the sale is taxable by MA.  Because the property was located in Missouri (MO) it is also taxable by MO.  MA will give you a credit for tax paid to other states for the MO tax you pay.  So you don't allocate part of the capital gain, you allocate 100% of the capital gain to MA, if you were a resident at the time it was sold.