I purchased a townhome in 2014 which was rented till May 2019 and sold in June 2019. Between May and June, I did several repairs, replaced ceiling fans and window treatments as well as other items. I am still confused on where I should be entering these costs. Should each be considered an asset and then identified as "disposed" of when I sold the unit? I am hoping that I am inputting my figures in error as my capital gains tax is through the roof.
to shorten the possible answers, what year did you start renting? if prior to 2019, have you reported the rental on schedule E and taken depreciation on the cost of the townhouse?
I started renting the unit in April 2014 and have been taking depreciation every year.
the repair and maintenance costs would go on schedule E. improvements would be added as an asset.
a) your gain selling price (1099 S which should match closing statement0
b) selling expenses - most those on the closing statement
c) cost of the townhouse, don't forget to put in what was allocated to land if it isn't there + improvements
d) depreciation
net proceeds = a less b
net basis = c less d
net gain = net proceeds less net basi
net gain less depreciation = long term capital gain
depreciation is recaptured as 1250 gain
even a large capital gain may not be hit hard with taxes. a portion of long term capital gain is taxed at 0%.