Sold My Rental Property in 2025, but I am lost what to Enter Asset Sales Price, Asset Sales Expenses, Land Sales Price, Land Sales Expenses.

[Sayed]

Hi. I am lost on this section. I sold an investment property for less than what I bought it for. I have no idea what to enter in these sections. Any help would be greatly appreciated. I left these sections blank because I am lost: Asset Sales Price, Asset Sales Expenses, Land Sales Price, Land Sales Expenses. This was always a rental property. I have never used it as a second home. Thank you.
 

[MindyB]

Since you are selling a rental property, you must split your total sale price and expenses between the building (the "Asset") and the "Land". 

To do this, you should determine a fair percentage for each based on your original purchase records or a recent property tax assessment, such as 80% for the house and 20% for the land. Apply that same percentage to your total Sales Price and total Sales Expenses to calculate the specific amounts for each of the four boxes you left blank. 

For example, if you sold the property for $300,000 with $20,000 in costs and use an 80/20 split, your Asset Sales Price is $240,000 and your Asset Sales Expenses are $16,000. The remaining 20% would then be entered as $60,000 for the Land Sales Price and $4,000 for the Land Sales Expenses. 

This allocation is necessary because even if you sold at a total loss, the IRS treats the land and the building as two separate components for tax reporting.

[Sayed]

I appreciate it. How exactly do I calculate what the "fair percentage for each based on your original purchase records or a recent property tax assessment?" I am on the tax appraisal district site for the county, but I am unsure which year would be better from a tax standpoint. Should I use year 2022 which was the year I bought the property? Should I use year 2025 which was the year I sold the property? The part that confuses me is the percentage. How do I know to use 80/20 split or something like a 60/40 split? Thank you. 

Year 2022Year 2025

[ThomasM125 · Accepted solution]

You would use the percentages in the year that you sold the property to split the sales proceeds between the building and the land. Presumably, the buyer is paying for the building and land based on current fair market value, which is better reflected in the current year appraiser records.

You need to add the improvement homesite value to the land homesite value to arrive at the total value. Then, divide the improvement homesite value by the total value to get the building percentage. Next, subtract the building percentage just calculated from "1" to get the land percentage.   

Multiply the respective percentages by the proceeds to determine the sales proceeds for the building and land.

[Sayed · Accepted solution]

I appreciate it. I think I understand the Asset Sales Price and Land Sales Price, but I am still lost on the Asset sales expenses and Land Sales Expenses calculations. Assuming I am using tax year 2025 numbers, this is what I calculated. 

Improvement Home Site 132,220

Land Value 30,000

Total Value 162,220

Improvement Home Site 132,220 divided by Total Value 162,220 = .815 asset %

1 - .815 = .185 land %

138,957.69 sold home multiply .815 = 113,250.51 Asset sales price

138,957.69 sold home subtract 113,250.51 Asset sales price = 25,707.18 Land Sale Price 

How do I calculate Asset sales expenses and Land Sales Expenses? Thank you.

[JamesG1 · Accepted solution]

Costs directly related to the Land could be assigned to the Land Sales Expenses.  For instance, a landscaper who makes the yard more presentable could be assigned to Land Sales Expenses.

Costs directly related to the Asset (Improvements) could be assigned to the Asset Sales Expenses.  For instance, a cleaning crew who makes the house (Improvement) more presentable could be assigned to Asset Sales Expenses.

The remaining expenses could be allocated between the two categories using the same percentage that you presented above.  For instance, the commission to the realtor who sold the property.

@Sayed