I need to report the sale of an inherited property in November 2025. Where do I enter the sale and also report tax paid overseas on the sale?

[rgoutham]

Unable to figure out how to enter the information under income.

[ThomasM125]

You need to report the sale as an investment sale as follows:

1. Navigate to Investment Income in the Wages and Income section of TurboTax

2. Choose the Stocks, Cryptocurrency, ... option

3. Skip the Import option

4. Choose the Other (land, second homes, personal items) option for investment type

5. On the screen where you enter the sale information, choose Second Home for the investment type and complete the rest of the entries

To report the foreign taxes go to the Estimates and Other Taxes paid section in the Deductions and Credits area of TurboTax, then choose Foreign Taxes to assign your foreign income to a country and enter the tax paid. You may be entitled to a credit for your foreign taxes. You can also take a deduction for the foreign taxes, but the credit it usually more beneficial. You will see an option to choose one or the other.

[rgoutham]

That option asks for the State where the property was and does not let me indicate that this was in a foreign location. How to address that?

[DaveF1006]

To clarify, where is this question coming from? What specific path are you reporting to that asks this question?

[VSN7]

When I go to foreign tax section, it is asking me to choose which 1099 div. There is no option to enter the sales tax I paid for the property that I paid. This is what I see and then it ask me to select country and then it ask me to select one of the 1099-int source. It is not showing or no place to enter the land sales tax information. How do I enter that?

[DaveF1006]

Reading your question, I am not sure if you entered this correctly so I will give you complete steps on entering the sale information and for claiming the foreign tax credit so there is no confusion on your part. To report the sale and sales tax, enter in this exact manner.

1. Go to Federal > Wages & Income.
2. Find Investments and Savings (1099-B, Stocks, etc.) and click Start/Review.
3. Click Add investments and select Enter a different way.
4. Choose Other (for land or second homes).
5. Enter the details of the sale (Sale Price, Date Sold, and your Original Cost).
6. Here, you can deduct the sales tax from the sale price to reduce the capital gain on the sale.

Now here is an important distinction on claiming the foreign tax credit. The IRS only allows a Foreign Tax Credit (FTC) for "Income Taxes" or "Taxes in Lieu of Income Taxes." If the foreign country charged you a Sales Tax, Value-Added Tax (VAT), or Stamp Duty (a tax on the transfer of the deed), this not eligible for the Foreign Tax Credit on Form 1116.  Here is how to tell. 

• Income Tax / Capital Gains Tax: This is a tax calculated on your profit (Sale Price minus your Purchase Price). If the tax was based on the "net gain" from the sale, it is a "creditable" income tax.
• Sales / Transfer / Stamp Tax: This is a tax calculated on the total sale price or a flat fee for the transaction. If you had owed this tax even if you sold the land at a loss, it is a transaction tax, not an income tax.

If you feel this was an income tax based on the parameters listed above, here is how to claim the foreign tax credit. 

1. Go to Deductions & Credits > Estimates and Other Taxes Paid > Foreign Taxes.
2. Click Continue until you see the screen: "Do you want to take a credit or a deduction?" Select Take a Credit.
3. You will see a summary of your 1099-DIV foreign taxes.  Make sure all income is reported by clicking on the boxes until you are done. Once you are in the summary screen you should get a prompt asking if you have more income to report than the 1099 DIV. Pay attnetion on how that is worded so that addtional income may be added.
4. Click "Add a Country" (do not edit the existing 1099-DIV entry).
5. Select the Country where the land was located.
6. On the screen for "Income Category," select Passive Income (this covers capital gains from land sales).
7. The "Gross Income" Screen: This is where it asks for the source of the income. Enter the Total Sale Amount (in USD) from the land sale.
8. The "Foreign Taxes Paid" Screen: Enter the Sales Tax/Transfer Tax you paid to that country here.

Again, I cannot undermine the importance of determining if this is a sales tax or an income tax based on capital gains.  if you determine this is an income tax and you are taking a credit, go back and add back in the tax where you entered the sale of the house. This was in step 6 of the sale information I provided in my first set of steps. You are not allowed to double-dip on your tax benefits.

@VSN7 

@rgoutham    

[VSN7]

Hi Dave, 

Thanks for getting back to me. The tax I paid is primarily on the capital gains and not sales tax. So I should claim in my tax return here as credit. Correct? 

[rgoutham]

Thanks

[VSN7]

@DaveF1006 one more questions, to figure out and do some analysis why my tax is high due to which 1099-div or 1099INT etc, is there way to turn off certain forms instead of deleting and re-importing?

[ThomasM125]

You cannot "turn off" forms, but you can edit the forms to enter a $0 as needed to render them inoperable.