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We're selling a rental property we've owned for 18 years. Can I get expert help from TurboTax on recaptured depreciation taxes and the capital gains taxes. ?

Our taxable income is only about $25,000 without the rental property sale.  The depreciation is about $72,000 and the capital gains will be about $240,000.
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3 Replies
M-MTax
Level 10

We're selling a rental property we've owned for 18 years. Can I get expert help from TurboTax on recaptured depreciation taxes and the capital gains taxes. ?

What kind of help do you need? Enter the sales date and price into the program. You know the purchase price and date and also the depreciation so enter those numbers and TTX will take care of the computations.

We're selling a rental property we've owned for 18 years. Can I get expert help from TurboTax on recaptured depreciation taxes and the capital gains taxes. ?

Carl
Level 15

We're selling a rental property we've owned for 18 years. Can I get expert help from TurboTax on recaptured depreciation taxes and the capital gains taxes. ?

Assuming the property was still classified as a rental at the time of the sale, the below guidance will help. As far as depreciation recapture and all that other stuff, the program will take care of it for you, in the background without bothering you with the details. That is of course, assuming you've been reporting things correctly all those years, as well as depreciating the property and other assets as required.

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  2020". Select it. After you select the "I sold or otherwise disposed of this property in 2020" 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 2020" 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.

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