topic Where do I enter improvements to a rental property that was sold? in Investors & landlords

Where do I enter improvements to a rental property that was sold?

buffysings — Thu, 06 Feb 2020 06:55:13 GMT

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.

Re: Where do I enter improvements to a rental property that was sold?

Anonymous — Thu, 06 Feb 2020 07:01:59 GMT

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?

Re: Where do I enter improvements to a rental property that was sold?

buffysings — Thu, 06 Feb 2020 07:04:44 GMT

I started renting the unit in April 2014 and have been taking depreciation every year.

Re: Where do I enter improvements to a rental property that was sold?

Anonymous — Thu, 06 Feb 2020 07:13:39 GMT

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%.

Re: Where do I enter improvements to a rental property that was sold?

buffysings — Fri, 07 Feb 2020 01:15:33 GMT

Thank you so much!

Re: Where do I enter improvements to a rental property that was sold?

Critter — Fri, 07 Feb 2020 03:24:09 GMT

Improvements made in the year of sale are NOT entered as assets ... they are added as repairs on the Sch E.