topic Rental property sold using installment sales in Investors & landlords

Rental property sold using installment sales

kuz214 — Mon, 15 Mar 2021 20:22:28 GMT

I sold rental property in 2020. I owner-financed, and would like to report the income as installment sales.

When I get to the "Rental Properties and Royalties" section of Turbo Tax, and the question comes up - Do Any of These Situations Apply to this Property?... The "Learn More" link specifies NOT to check the "sold" box until the final year of payment, if the disposition was reported using the installment method.

But later, in the Installment Sale section, after entering Principal and Interest received, Type of Business Property, and confirming that it was Depreciable Property... I get to the question "Have you reported the sale of this asset in your business or rental activity?" When I answer "No" (because I was instructed NOT to check "sold" until the final year), I get the message telling me to Enter the Asset Sale and then come back.

Please help clear up this apparent contradiction.

Re: Rental property sold using installment sales

RayW7 — Mon, 15 Mar 2021 21:21:59 GMT

An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. You can read more about it here.

Follow these steps to report the sale in TurboTax.

Open your return in TurboTax.
In the search box, search for installment sales and select Jump to installment sales.
Check the box next to Sales of real estate, cars, or anything else for which you receive payments over two or more tax years (installment sales). Select Continue.
Answer Yes to Do you want to report an installment sale?
Follow the instructions to enter your sale details.

-for more information on installment sales follow this link-

Publication 537 - IRS

Re: Rental property sold using installment sales

kuz214 — Tue, 16 Mar 2021 20:11:37 GMT

Sorry Ray, your response did not really clear up any of my confusion. I do understand WHAT an installment sale is, and how to enter the info. It's the "Rental Properties and Royalties" section that seems contradictory.

I start entering the rental property info the same way that I have for the past umpteen years that I've used TurboTax...

But I know this time will be different, because I sold the property in mid-2020. So when I get to THIS page:

The directions seem clear that I should not check that box, because it's an installment sale. But then when I do get to the "Less Common Income" section and begin entering the installment sale info, I eventually get to this screen:

And when I answer "No", (because I left the "sold" box unchecked in the previous section), I get this message:

So, am I supposed to leave the box UNchecked, enter all my expenses for the first half of 2020 prior to the sale, then move on to the section to enter the installment sale info, and then come back to the previous section and check the box?

It's very frustrating to be confused with what should be the "easy part". I haven't even reached cost basis and depreciation recapture yet!

Re: Rental property sold using installment sales

ThomasM125 — Tue, 16 Mar 2021 20:41:29 GMT

I entered a sale of rental property in TurboTax and did not have to go to the installment sale section, everything was handled in the rental area when I indicated that I sold the house. Please see these screen shots:

You may have to delete the installment sale entries you made, and then return to the Rental Income section and try to enter the sale there. Also, make sure you have done the updates to your TurboTax program.

Re: Rental property sold using installment sales

kuz214 — Tue, 16 Mar 2021 21:41:36 GMT

In order to get to that "Sales Information" section, do I need to check the box that the instructions specifically say not to check?

Re: Rental property sold using installment sales

ColeenD3 — Tue, 16 Mar 2021 22:50:16 GMT

You want to choose sold on the first screen and click the box for sold on the second.

Re: Rental property sold using installment sales

mjam1984 — Sat, 19 Feb 2022 17:38:49 GMT

I click on sold under rental property but never come across the option of selling as installment payments

Re: Rental property sold using installment sales

DMarkM1 — Sun, 20 Feb 2022 14:42:05 GMT

You are correct, the option to report the real estate sale as an installment is not in the "Rental Property" topic. Instead scroll down to "Other Business Situations" and use the "Sale of Business Property" topic. On the follow on page select the "Sale of real estate...two or more tax years..." option.

Reporting the property as sold/disposed in the "Rental" topic calculates the depreciation and allows for any prior losses that were unused.

Re: Rental property sold using installment sales

jaaks6 — Wed, 16 Mar 2022 13:47:59 GMT

After reading this I had questions. 1)we sold 2 rental properties together as one sale, 1 was land only connected to another with a building on it, neither had a business on it that we owned, just property 2)we are carrying/ financing the note for the new owners for 25 years so we get monthly principal and interest payments. 3) we have received the down payment but paid legal fees and commission on the sale. Really confused how this all needs to be on the taxes. Can you help?

Thanks,

Angela Amos

Re: Rental property sold using installment sales

JamesG1 — Wed, 16 Mar 2022 22:00:04 GMT

This should help.

The sale of the properties recorded as an installment sale may be reported at Sale of Business Property.

In TurboTax Online Premier version:

Go to Federal / Wages & Income / Your income / Other Business Situations.
Click Start to the right of Sale of Business Property.
At the screen Any Other Property Sales, select Sales of real estate, cars, or anything else for which you receive payments over two or more tax years (installment sales).

See this TurboTax Help.

Re: Rental property sold using installment sales

jaaks6 — Thu, 17 Mar 2022 01:58:13 GMT

I sold 2 rental properties 4-29-2021. We owner carried the note with 25 years installment payments.

I know I have to show the sale of business property below the rents and royalties tab but not in the rents and royalties tab?? although we did not sell a business just a piece of land and a building on an adjacent piece of land. We were paid a down payment minus the legal fees and realtor commission at the sale, then received principal and interest payments through the rest of the year. 1) Do I split the cost of the total amount of the sale price between two properties? WE have had these properties since1991, so I don't know what difference this makes. Is it possible you could actually call and walk me through this?

Re: Rental property sold using installment sales

RobertB4444 — Fri, 18 Mar 2022 01:53:00 GMT

@jaaks6 Your installment sale will take you off of the rents and royalties page to a whole new tax form but you're going to start setting up the sale on the rental property page so that you can carry your basis over to figure out what portion of each payment is taxable.

We can't arrange to call you but you can certainly call us.

You are probably better off having someone walk through the return with you to look at your entries so I recommend getting live expert help.

Here is a link to finding a TurboTax expert.

However, that requires upgrading your product which may be an expense you don't want. In that case you can call an expert and ask questions over the phone.

Here is a link to the TurboTax Phone Number.