What is the best way to handle expenses of vacant rental property for sale?

[BostonKevin]

Thanks for the very clear answer. 

Just one follow up question - what if the assets were added many years after the original purchase of the property? In my case, I added some improvements in order to make the property rentable - a new, insulated  front door, new windows and door on the back porch, and a new washing machine.

We bought the property itself back in 1996 and it increased in value to 3x its original price.

I added these assets in 2020. (The property had been our principal residence up until that point.) 

So, the question is as follows:

+ Should the original cost of each asset added in 2020 be divided by the original purchase price of the property in 1996 in order to obtain that asset's percentage of the 2022 sales's price? 

It seems that way from your answer.

Thanks!      

[BostonKevin]

Would you also know what kinds of Turbo Tax asset types a new front door and an updated porch would be?

Thanks!

[Critter-3]

The program will handle the assets correctly if you just follow the interview but what worries me more is that you may not have been depreciating the property correctly... Please seek  a local tax professional to get educated on this situation  ASAP.  

[BostonKevin]

I used TurboTax to specify that a rental asset e.g. a new front door, a washing machine, etc. has been sold in 2022 as part of a property sale. I calculated its its Asset Sales Price by multiplying  (asset original cost/original property cost) by the property sale price and I calculated its Asset Sales Expenses by  multiplying  (asset original cost/original property cost) by the real estate agent's commission.

After doing this for the 3 rental property assets, I then try to enter information on the sale of the actual house itself.  Instead of letting me enter the sales price of the house, TurboTax has taken the sum of the rental assets sale prices and 'assumes' that this is the actual sale price of the house.

Perhaps Turbo-Tax has a few limitations? I have used it successfully for years but maybe this admittedly unusual situation is a bit too much for it?

Kind regards,

Kevin 

[tagteam]

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@BostonKevin wrote:

After doing this for the 3 rental property assets, I then try to enter information on the sale of the actual house itself.

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Is the rental real estate (the house) not listed as a separate asset in the program? It should be.

[Critter-3]

The program does have limitations so YOU need to get out a pencil/paper/calculator and do the math yourself so when the program asks for the sales price  & cost of sale figure for each item you have it at your fingertips. 

[Carl]

My post in this thread with date/time stamp of June 3, 2019 3:30 PM gives you the basic guidance on this, if you'll scroll up and read the part titled "Reporting the Sale of Rental Property".

[BostonKevin]

Thanks for the reply.

When I did this, my tax bill literally tripled.

And is there a way for me to enter as rental assets all the improvements that we made to the house between 1996 and 2020, the year when we began renting out the property?  

Unless I need to enter all the improvements made between 1996 and 2000 as separate rental assets to de depreciated?  These improvements totaled approximately 150K and helped reduce our tax hit on the home sale considerably.

On a different topic, is it possible to eliminate the depreciation assets completely from this return, even if these assets had been part of the previous year's return? It would simplify the return considerably if we could just eliminate them.

Thanks!

Kevin

[Critter-3]

@BostonKevin 

When you first started renting the property the total cost (including improvements) was to be depreciated ... so did you fail to include the improvements in the cost basis at that time ?

If so you need to file a form 3115 to correct this issue and this is not a DIY situation and professional assistance is highly recommended to make this correction. 

[BostonKevin]

Thanks.

Would a Turbo Tax specialist be capabale? 

[Critter-3]

Probably ...  but you would have to use the TT FULL SERVICE online option which is the same as using a local tax pro.    https://turbotax.intuit.com/personal-taxes/online/live/full-service/

[tagteam]

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@BostonKevin wrote:

Would a Turbo Tax specialist be capabale? 

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You could try something like TurboTax Assisted or Full Service, but regular Support will most likely not be of much help.

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

[BostonKevin]

That is what I will do. Thanks for your help!

BTW, they don't seem to be open today (Saturday).

[BostonKevin]

On a different topic, would you know if there is a way to upload to TurboTax online data that was already entered in to the TurboTax Windows application?  I have already entered almost everything and would to avoid entering all this again.

Thanks

Kevin

[VolvoGirl]

Sorry no.  Not for the current year.  You can only Transfer from the desktop program into Online next year.  Why do you want to switch to Online?

If you used the Desktop program before you may notice several differences and not like the online version. It has less features and no Forms Mode. The Online versions don't have all the same forms so you might have to upgrade to a higher Online version. You can only do 1 return. Your return is only saved online so be sure to save both the .tax2022 data file and the pdf file to your computer when you are done. In case you need to amend in the future or if you need a copy to get a loan or something. You might not be able to access your online return when you need a copy.