Is a rental property seller credit considered a part of selling expenses when calculating gain or loss of a sale? Where do I report this in Turbotax?

[Jay6428]

I sold my rental home in mid 2019 and gave the buyer a seller credit of $1,750 which is listed on the closing statement. The 1099-S reported only the sale gross proceeds of $300,000. Can I include the $1,750 amount as a selling expense in calculating gain or loss? If so, where do I report this in Turbotax? I am having a hard time figuring this out. Thanks in advance for your help.

[Hal_Al · Accepted solution]

I would add the $1750 to your cost basis, to reduce your capital gain.

Alternatively, you can call it selling expenses.

The "correct" way is to reduce the selling price, but that risks waiving a red flag at the IRS, since the 1099-S is more.  Form 4797 actually  has a place to enter the 1099-S amount (and TurboTax does that).  So, you may be OK, even when you report a different sales amount than shown on the 1099-S.

[Jay6428]

Thank you for your response.  I will explore the options that you suggested.  Appreciate your guidance!

[Jay6428]

Sorry to bother you. But I am still not clear on where I can enter the $1750 in seller credit that I provided during the sale of my rental property.  That amount is not on the 1099-S. That form only shows the total sale price under gross proceeds in the amount of $300,000. Technically, the net sale or net proceeds should be $298,250 ($300,000 minus $1750). I went back and checked every where, just not seeing a place where I can claim this $1750 in seller credit. Any further guidance on this matter will be greatly appreciated. Maybe I should upgrade and get the live advice option from TurboTax and have a professional also review my tax return. Thanks again!

[Hal_Al]

There is no place to enter seller credits.  You have to use a workaround.

At some place you entered the cost basis (what you originally paid for it plus improvements).  Increase that amount by $1750.

[Jay6428]

Okay, got it.  Thank you very much.  This is of great help.