What version of turbotax is right for my case?

mualoan — Thu, 06 Jun 2019 13:24:31 GMT

What is correct version of TurboTax?

Details: 5 yrs ago, I inherited a property under the rental and I continued to rent it out. At the time the property is under loan, and I continued to pay a few months loan but never deducted interest with TurboTax premier (CD). Then, I paid off the loan the same first year.

- Is there a guidance in turbotax to deduct the loan payment back on the first year?

- Is there a guidance in turbotax to subtract the payment (loan pay off) to the capital gain of the sell?

- Is there a guidance to calculate the depreciation on the property that I had never done?

- Which is the correct version I should buy?

Thank you

- Is there a guidance in TurboTax to deduct the loan paym...

MinhT — Thu, 06 Jun 2019 13:24:32 GMT

- Is there a guidance in TurboTax to deduct the loan payment back on the first year?

You are allowed to deduct as rental expenses interest which you paid on your rental property in the year you paid it. The only way to claim it retroactively is to amend that year's tax return. However, there is a time limit and you can only file the amended return (Form 1040X) within three years from the date you filed your original tax return or within two years of the date you paid the tax, whichever is later. Therefore, if you paid that interest 5 years ago (before the 2014 tax year), you can no longer amend and your interest deduction is now lost.

- Is there a guidance in TurboTax to subtract the payment (loan pay off) to the capital gain of the sell?

The loan pay-off amount does not affect your capital gain or loss at the sale of the rental property. The capital gain/loss is the difference between the sales price (less selling expenses) and the cost basis of your property. Depreciation will be discussed in your next question.

- Is there a guidance to calculate the depreciation on the property that I had never done?

In the rental section of TurboTax, there is guidance on depreciation of rental property which is depreciated over 27.5 years. If you set up the property in TurboTax as an asset and indicate the date the property was placed in service, then TurboTax will calculate all the prior depreciation that should have been taken, and the depreciation for the current year.

Your property is subject to depreciation recapture, to the extent that there is a capital gain on the property. When you sell the property, you must recapture all allowable depreciation and pay tax on it at the rate of 25%. The emphasis is on allowable, this means that if you did not actually deduct depreciation (by omission or by will), you will still have to calculate allowable depreciation for the whole rented period and recapture that amount of depreciation and pay tax on it.

In your case, if you never deducted depreciation, I recommend that you amend your tax returns for the years 2014, 2015 and 2016 to claim it. Your rental profit in those years will be lower and it may affect your tax in those years. Depreciation for the years before 2014 cannot be claimed but you will still have to calculate it and include it as recaptured depreciation when you sell the property.

To amend your tax returns for those years please follow these links. You must start by amending 2014, then 2015 and finally 2016:

https://turbotax.intuit.com/personal-taxes/cd-download/amend/ty16/

https://turbotax.intuit.com/personal-taxes/cd-download/amend/ty15/

https://turbotax.intuit.com/personal-taxes/cd-download/amend/ty14/

Instead of amended returns, another way to deal with this situation is to file form 3115, Application for Change in Accounting Method.

If you choose to do this on your own, I recommend you use TurboTax Premier - Desktop Software https://turbotax.intuit.com/personal-taxes/cd-download/premier.jsp .

Because both of these methods involve a certain level of complexity, I would like to suggest you consider using TurboTax Live, a new product offering that allows you to do your taxes with live CPA or EA advice on demand and provide a final review with you. See https://turbotax.intuit.com/personal-taxes/online/turbotax-live.jsp for more information.

- Which is the correct version I should buy?

If you choose to do this on your own, I recommend you use TurboTax Premier - Desktop Software https://turbotax.intuit.com/personal-taxes/cd-download/premier.jsp .

topic What version of turbotax is right for my case? in Get your taxes done using TurboTax

What version of turbotax is right for my case?

- Is there a guidance in TurboTax to deduct the loan paym...