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Pawan
Returning Member

We (MFJ) sold a rental property in June 2021 which qualifies for the 2 out of 5 year rule and we have capital gains. I want to know how to report this on which IRS form?

We owned the property for last 5 years, stayed in it for 3 years and rented out for last 2 yrs and finally sold it to the same tenant. How to report this and which IRS form to use?
4 Replies
DoninGA
Level 15

We (MFJ) sold a rental property in June 2021 which qualifies for the 2 out of 5 year rule and we have capital gains. I want to know how to report this on which IRS form?

If you lived in the home for 730 or more days in the five year period from the date of sale, you report this as a personal residence sale.  The sale is reported on Schedule D and on Form 8949.  You must also recapture the depreciation taken on the home when it was a rental.  You should have received a Form 1099-S for the sale of the property.  Follow the TurboTax interview questions for the sale of the home.  If you are using the TurboTax online editions, the Premier or Self-Employed edition must be used to report the sale.

Make sure that you indicate that you want the sale of the home reported on your tax return. 

 

Go to this IRS website for Publication 523, Selling Your Home - https://www.irs.gov/pub/irs-pdf/p523.pdf

  • Click on Federal Taxes (Personal using Home and Business)
  • Click on Wages and Income (Personal Income using Home and Business)
  • Click on I'll choose what I work on (if shown)
  • Scroll down to Less Common Income
  • On Sale of Home (gain or loss), click the start or update button

Or enter sale of home in the Search box located in the upper right of the program screen. Click on Jump to sale of home

 

If you lived in the home for less than 730 days in the 5 year period from the date of sale, then the sale is for a rental property and Not a personal residence.

See this TurboTax support FAQ for a rental sale - https://ttlc.intuit.com/community/rental/help/i-sold-my-rental-property-how-do-i-report-that/01/2625...

Critter-3
Level 15

We (MFJ) sold a rental property in June 2021 which qualifies for the 2 out of 5 year rule and we have capital gains. I want to know how to report this on which IRS form?

In the rental section you need to say the property was taken out of service on the date of sale however you will not sell the assets in the schedule E section. You will need to report the personal residence sale in the personal residence sales section only. This might be a tax year that you’d want to use a paid tax preparer either locally or upgrade to one of the live options in the TurboTax system. 

AmeliesUncle
Level 13

We (MFJ) sold a rental property in June 2021 which qualifies for the 2 out of 5 year rule and we have capital gains. I want to know how to report this on which IRS form?

Unless things have changed ... you DO report the sale in the rental section.  After you indicate that the rental was sold and the "asset" was sold, the program should ask you if it used to be your primary home. 

 

With that being said ... the sale should be reported on Form 4797, but the last time I checked the program incorrectly reports it on Form 8949.

Critter-3
Level 15

We (MFJ) sold a rental property in June 2021 which qualifies for the 2 out of 5 year rule and we have capital gains. I want to know how to report this on which IRS form?

The TurboTax program does many things well however this is not one of them. It requires an understanding that many DIY users do not understand that’s my suggestion to seek assistance with this return is highly recommended.

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