I sold a home last year that I had bought in 2005 as my primary home, then converted into a full time rental in 2011. I have entered my home sale information but believe the taxes the program is asking me to pay in are too high. My Gain on Sale on the Home Sale Worksheet is shown as $80,745. I don't understand how the gain on sale can be this high when I bought the home for $138K and sold it for $180K and had $29K depreciation over the ten years it was a rental. The adjusted basis of the home sold is shown as $87,991 but I don't know where this number is coming from. If I click the Quick Zoom to Adjusted Basis of Home Sold Worksheet link that is shown between lines 5 & 6, that worksheet is totally blank. See attached screen shot.
You can look on the Depreciation Report (Depr Report) and that should show the cost of the property and prior and current depreciation. If you add the two depreciation figures together, that would be the accumulated depreciation and the difference between that and the cost would be the basis.
The basis would start with the cost you entered when you put the property into rental service. That may be different from what you paid for the house, as you should enter the fair market value if it was less than the cost when you put the property into rental service.
To that amount you would add the cost of improvements and deduct depreciation allowed on the property during the time it was rented to get the adjusted basis.
Thanks for your reply. The accumulated depreciation shown makes sense. I'm not understanding what you mean when you say the difference between that accumulated depreciation and "the cost" would be the basis. The Cost on my form is 87,750. This is the fair market value shown for my improvement only, off of my property tax bill back in 2011. This same 87,750 is shown under depreciable basis on my form. So it seems those two are the same? See attached screen shot.
Back to my original post, does it make sense that the Adjusted Basis of Home Sold Worksheet is blank?
Ultimately, if my entries are right, I still need to zero out some line item assets that I have listed under the property from when I depreciated a couple appliances and the refinancing fees I paid the year I put it into service.
You would only report this as a rental sale if your converted your home into a full-time rental in 2011.
You do not qualify for the home sale exclusion because you did not use the property as your main home in two of the past five years.
Topic No. 701 Sale of Your Home
You would only report this as a rental sale if your converted your home into a full-time rental in 2011.
Yes, that's exactly what I did. Bought in 2005 and converted to a full time rental in 2011.
You do not qualify for the home sale exclusion because you did not use the property as your main home in two of the past five years. -
OK, so this needs to be entered as "no" on line 9 of the home sale worksheet, correct? This is not answered currently. (not sure why it isn't)
I don't understand how you arrived at $102,955 for taxable gain on the spreadsheet breakout you provided.
How does your adjusted basis on your worksheet= $87, 991? First of all, you omitted depreciation. In the example taken from @ErnieS0, this is how it is figured on the Form 4797. You should be reporting the sale on that form, so you can include the depreciation.
In the simplest math possible, not taking appliances and land into the equation, I get:
$138K purchase
+$11,264 closing costs
-$29,000 depreciation
_______________________
$120,264 basis that you would subtract from sales price for gain.
What if the owner lived in the home for 2 years, within the 5 year timeframe; then converted to a rental home. Thus, they sold it at the 4 year mark?
Why would the TurboTax say that the Asset cannot be linked to the Home Sale Worksheet?
@chastity_lashure You will still sell the home from the rental property worksheet. When you are going through the rental property section it will ask you if you have always used this asset for business since you purchased it. Select 'no' and tell it that it was personal use up until two years ago. Then when you enter the sale information it will allow you to take the exclusion.