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Foreign Real Estate Sales - est payment and forms to file

My parents just sold their 2nd vacation home in Asia 2 weeks ago. They live in NYC. They'll need some guidance in tax prep for 2024. 

1. Estimated tax payment for capital gains - How to utilize TurboTax to make estimate quarterly payments? 

2. Does it matter if the quarterly est payments differ in amounts, as they gather all the info over time to make more precise calculations? 

3. Which forms need to be filled out along with estimated payments? 

4. Since it's outside of NY, there is not tax implications for NYS or NYC, correct? TurboTax automatically copies over gains to state returns. What is the best way to make adjustments? 

 

Also which turbotax product is best for this situation? Thanks! 

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5 Replies
DaveF1006
Expert Alumni

Foreign Real Estate Sales - est payment and forms to file

Yes, let's address these questions. 

 

  1. If you wish to make estimated tax payments in 2024 and use Turbo Tax and haven't set up an account, log into Turbo Tax.  Once the account is set up, then go to federal>other tax situations>other tax forms>Form W-4 and Estimated Taxes. 
  2. As you go through this section, on the screen that says Review your Estimates, select Review Now.
  3. Then it will ask you a series of questions regarding age, filing status, and projected income. There will be a section where you will record the capital gains from the sale of the house. There will be other questions that follow that are designed to determine how much estimated taxes you should pay.
  4. The quarterly tax payments should be equal in all four quarters to avoid a possible estimated tax penalty.
  5.  Continue through the interview until you reach a screen summarizing what your estimated tax payments should be for all four quarters. In this screen, there will be a payment option to either pay through a government website or to print out vouchers, which gives you an option to pay as you go.
  6. As far as forms, Turbo Tax will generate all the forms you need in the return.
  7. There is no tax implication in your NYS or NYC income. As you complete the NYS interview, there will be an allocation screen where you would actually indicate that this is not New-York sourced income.  That is where you will report the adjustment.
  8. Turbo Tax Premier is the product to use to report the sale of the house in 2024.
  9. Once complete your tax return should have 4 forms 1040 ES, which are vouchers to make your estimated tax payments, if you chose not to make those payments electronically. There will also be an estimated tax & W4 worksheet and estimated tax option that will generate in your return.

 

 

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Foreign Real Estate Sales - est payment and forms to file

For NY filings in TurboTax Home and Business, I don't see a section to allocate investment g/l. Since the second home was outside of U.S., it makes sense that it doesn't require to pay NY taxes. 

 

Here is a section I found to make adjustments to federal income: 

-> Investment Income from U.S. Government Agencies -> Other Investment Income Exempt from New York 

 

Is this the right place to make adjustments? Thanks. 

Foreign Real Estate Sales - est payment and forms to file

Also, is there any document (by NY or IRS) that clearly state that second home outside of U.S. doesn't require to pay state taxes? Thanks. 

Foreign Real Estate Sales - est payment and forms to file

Additional question re: 1099-S. Since the vacation home is a foreign property in Asia, we didn't receive any 1099-S. Are we required to file 1099-S ourselves? How can we do that? 

AmyC
Expert Alumni

Foreign Real Estate Sales - est payment and forms to file

1. They live in NY. That is their resident state so it taxes all income.  Frequently Asked Questions about Filing Requirements states: As a resident, you pay state tax (and city tax if a New York City or Yonkers resident) on all your income no matter where it is earned.

2. No place to made adjustments since it is all taxable to federal and state.

3. There are documents which state all worldwide income is taxable to resident. There are some exceptions. If you feel you may qualify at the federal level, go through this quick quiz. For NY, you must be out of the country 450 days out of 548, see State of New York Taxation & Reporting of Foreign Income.

4. You don't need the 1099-S form to enter the sale of a second home. It is just a question for the IRS to match up forms if you have one. The sale goes on sch D and is entered in the same section as stocks and bonds. You will select sale of home. For help entering, see Where do I enter the sale of a second home, an inherited home, or land on my 2023 taxes?

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