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Darby5
Returning Member

Where to enter expenses of fixing up rental property to sell it

Hi, we did numerous things to our rental property in the months before selling it (after we had our tenant move out), such as new sod and landscaping, repairing floors, repainting walls, replacing faucets & light fixtures, etc.  Would I enter this under rental expenses for the property, or would I enter them as a cost of sale when I report the sale?  Or does either area work?

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PatriciaV
Expert Alumni

Where to enter expenses of fixing up rental property to sell it

If the property was not available to be rented (or you had no plans to rent it again), any repair costs you incurred before you listed the property increase the basis of the property and reduce any gain on the sale. You would enter these costs as a separate Rental Asset (improvements), which would qualify for depreciation if the sale didn't occur in the same year.

 

Because you can't claim depreciation on assets added and sold in the same year, you may wish to consider the Safe Harbor Election for Small Taxpayers. TurboTax will ask you about this election under the Assets/Depreciation section of your Rental Property. If you qualify for this election, you can expense up to $10,000 in costs that would otherwise be depreciated over a very long time. If you choose the Safe Harbor Election, the repair costs would NOT be added to your basis in the property.

 

During the period before the former rental is sold, the mortgage interest would be considered Investment Interest Expense. This is an Itemized Deduction on Schedule A.

 

Any repairs needed in order to close the sale may be included in Selling Expenses.

 

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