How to report rental property sale by TurboTax - Is there a step-by-step instruction ?

I assume you are entering the information in Sales of Business Property, since there was no rental use in 2019.

1. Once you are in your tax return, click on the “Business" tab ("Federal Taxes" tab in Premier)
2. Next click on “Business Income and Expense" ("Wages and Income" tab in Premier)
3. Next click on “I’ll choose what I work on” (Jump to full list)
4. Scroll down the screen until to come to the section “Less Common Business Situations” ("Business Items" in Premier)
5. Choose “Sale of Business Property” and select “start’
6. Select "Sale of business or rental property that you haven't already reported"
7. Sale of Business or Rental Property - yes
8. Enter all the information about your Rental Property Sale here

1. Description - address of property
2. Date acquired - original acquisition date
3. Date sold - date of sale (should be on 1099-S)
4. Total sales price - total sales price (should be listed on 1099-S)
5. Cost of property (or tax basis) plus expenses of sales - original cost plus any capital improvements plus expenses of sales
6. Depreciation taken on this property - total depreciation taken property when rental (Please note the IRS will assume that you have taken the correct depreciation on your rental property while your property was available for rent regardless of whether you have actually take it or not)

1. What type of property is this? - select - Rental estate that I took depreciation on.
2. Installment sales - no if not on installment sale
3. 2 screens that show the summary of what you have entered for your property sale
4. Sale of Other Business Property - Choose yes if any of these situation apply, otherwise choose no.

For the CA withholding, enter it following these steps.

Federal Taxes tab

• Deductions and Credits
• I'll choose what I work on
• Estimates and Other Taxes Paid
• Other Income Taxes - click start or update
• Other Income Taxes Paid in 2019
• Withholding not already entered on a W-2 or 1099

Thanks for the very helpful response.  I actually entered the info at "Rental property -> Depreciation" area and so encountered the issues, but Not "Sales of Business Property" area.

The reason was that when I went through "Sales of Business Property" before, TurboTax instruction told me not to report the rental property sale there, but report it at the "Depreciation section of the rental property".

Per your response, I have some further questions...

1. As TurboTax instructed me to use "Depreciation" section at the rental property to report the sale, and so I just went to my rental property list, input "0" days for rent and personal use in 2019, and go through the steps to reach "depreciation" area.  Then I only saw "sale price" and "expense" field that allows me to input amounts.

Per your instruction, “Business Income and Expense" is a totally different section - Reporting at this  section seems not consistent with TurboTax instruction regarding rental property sale to make the reporting at Rental property->Depreciation.

2. What're the differences between "depreciation" in rental and “Business Income and Expense" to report rental property sale?

3. In the actual detailed situation - the tenant lived there in 2019 but since it's for sale and I need the assistance from the tenant, there was no rental collected.  Should this considered being rented or not during 2019, per tax definition?

4. If I input ">0" days (like 60 days) for renting during 2019 in "Rental property -> Depreciation" procedure, will the process allow me to report the sale at "Depreciation" area instead of “Business Income and Expense" area? 

5. If  Item 4 is "Yes", will the Sale reporting at Depreciation give me the chance/form/page to input "state withdrawn tax", "adjusted basis", "purchase cost" and 1099-S as “Business Income and Expense" does?

Thanks!

this particular response is empty, but I didn't find a way to delete it.

Hi, 

Your help is much appreciated on this question: I sold my rental property in 04/2020, which I rented out only for one month in 01/2020. Is this treated as Business property sale? If not, where in Turbo tax and what is the step by step to report this sale please?

Much appreciated!

Kit

In TurboTax Online, to report sale of the rental property, follow these steps:  

• Down the left side of the screen, click on Federal.
• At the top of the screen click on Wages & Income.
• Under Your income, scroll down to Rentals, royalties and Farm.  Click Show more to the right.
• Click Edit / Add to the right of Rental Properties and Royalties.
• At the screen Your 2020 rentals and royalties summary, click on Edit to the right of the rental activity.
• At the screen Here's rental property info, scroll down to Assets (Depreciation) and click Edit to the right of the rental property.
• Click Yes, I want to go to my asset summary.
• Click Edit next to the asset that was sold.
• At the screen Tell us more about this rental asset, click The item was sold, retired, stolen, destroyed, disposed of, converted to personal use, traded in, or given away.
• Enter the date sold.  Click Continue.
• Follow the interview questions to report the sale.

I followed the step and finish entered the information. But the message comes up: "Your sale of property did not result in a gain. Report here only sales of property you made a profit on. We will remove this sale now." And all information was deleted. Where should I enter now?

Could you show me the step by step information of entering?

Thank you very much!

Lillian

This answer from JamesG1 is exactly step by step. This section does not give that statement.

In TurboTax Online, to report sale of the rental property, follow these steps:  

• Down the left side of the screen, click on Federal.
• At the top of the screen click on Wages & Income.
• Under Your income, scroll down to Rentals, royalties and Farm.  Click Show more to the right.
• Click Edit / Add to the right of Rental Properties and Royalties.
• At the screen Your 2020 rentals and royalties summary, click on Edit to the right of the rental activity.
• At the screen Here's rental property info, scroll down to Assets (Depreciation) and click Edit to the right of the rental property.
• Click Yes, I want to go to my asset summary.
• Click Edit next to the asset that was sold.
• At the screen Tell us more about this rental asset, click The item was sold, retired, stolen, destroyed, disposed of, converted to personal use, traded in, or given away.
• Enter the date sold.  Click Continue.
• Follow the interview questions to report the sale.

I followed this but it does not have any place to enter capital improvements and mortgage expenses to calculate deductions for capital gains tax.  My scenario involves the sale of rental property that was previously my personal residence for years prior to converting it to a rental so the many capital improvements/expenses I can deduct are not in the existing Rental depreciation schedule E.   So how can I make sure these deductions are factored in to.  Sale price minus original cost, minus capital improvements, minus mortgage loan costs, plus depreciation to determine what I owe in capital gains and depreciation recapture? 

Capital improvements are added in as additional assets that need to be depreciated. Each improvement needs to be accounted for and depreciated. Mortgage interest is an expense that can be added. 

1. In TurboTax, go to federal>wages and income>see all income>Rentals, Royalties, and Farm>Rental Properties and Royalties (Sch E)>start or revisit
2. Answer Yes to the question Did you have any rental or royalty income and expenses in 2020 for property you own?
3. Follow the on-screen instructions as you proceed through the rental and royalties section.
   • We'll ask you to enter general information about your rental (like description, address, and ownership percentage). You will also be given the opportunity to report when the conversion was made from your  personal residence to a rental.
   • You will eventually reach a screen that says Do Any of These Situations Apply to This Property? here is where you indicate you sold the property. Then you will enter information about how long it was rented .
   • Eventually, you'll come to the Rental Summary screen, which is where you enter your rental income and expenses, assets and depreciation, and vehicle expenses. Here is what the screen will look like. From this screen, you can enter all your expenses plus your improvements (assets).

I understand the sale of an asset (rental property) has the total depreciation taken while a rental (you can't depreciate owner occupied property) which should already have the capital improvements in the program that itemize the depreciation that was taken during the tax years it was a rental.  But the additional items are not capital improvements that were depreciated during the rental phase, they are items that add to the basis while I occupied it as my home for many years.  It is not proper in my opinion to add that to the basis in Sch E which is for a rental business.  Additionally, you can declare the mortgage loan "costs" for the loan too (this is not mortgage interest) I think their should be a Capital Gains Sch. that can deal with this without these work arounds that muddle the waters.   

Additional note, you do not "depreciate" assets put in place when owner occupied.  You add them to the basis of the property when it is sold.  Properties are often owner occupied for years before becoming a rental and reported on Sch E Rents and Royalties.   BTW, I try to enter the total amount of additional improvements as an added deduction but Turbo tax threw it into "carry forward" because I reached the limit for the year. Turbo tax is poorly programmed to deal with this scenario.  I was able to manually figure what I owned and paid the taxes and filed for an extension because no one in support could properly help me so they just found a way to pass it onto to someone else or in one case was very nasty to me that they had other calls.  I have used Turbo Tax for years and sadden by this years events.

I have been using TT since 2001 to report the rent of a property that was my primary residence for 10 years. I sold the property in January 4 2021. The last tenants moved out in July 31 2020 and the property stayed vacant since I put it up for sale. When I started my taxes this year, I opened the property to report the sales but since I did not have any income and expenses in 2021(reported in 2020) Turbo tax asked me to delete the section which I did but it wiped out the entire record for the rental. There were no place to scroll down to. I was stuck on the screen.  So I went ahead and deleted the entire return and started over.  The rental section was restored but I went into the same snag. I spoke on the phone to 2 different people. One couldn't  help and the other one helped a bit but she went to home sales instead of rental or business sale. ( because, we could not find the section for rental and business sales) When I was done with the section I was told that my tax liability was 0. I know that is not right because when I started with her there were some taxes with fed and states tax. I am using turbo tax premier. Can you please give me a step by step instructions on how to complete that section.? I would also like to know what to do with the fees that I paid for closing on the sale and when they asked for the sale price do they mean the full price or the net proceed after paying all the closing fees. Thank you.

To report the sale of a rental property, in TurboTax follow these steps:

1. Sign in to your TurboTax account
2. In the search box enter rentals and then select the Jump to link in the search result.
3. Answer Yes to the question Did you have any income from rentals or royalties? Answer yes even thought you did not have any rental income, this will allow you to continue to the next step.
4. When you get to What are you here to report? select Rental property and fill out the description, address, and owner.
5. When you hit Tell us about your situation this year check the Sold box along with any other boxes that may apply.
6. Continue following the onscreen prompts to enter info about your rental property. Eventually, you'll get to the Review your rental property info screen. You can report the sale in the Expenses/Assets (Depreciation) section, along with any other pertinent info (like income and expenses)

This link I sold my rental property. How do I report that? has information you may find useful.

@tatou1

I have the same situation with alternative minimum tax. I sold my rental and have a total income 173206. The alternative minimum tax screen is as follow:

Total income 173206.     Tentative Minimum tax 1201.00,    Actual tax owe 12928.00 

A blank window where I am supposed to write my alternative minimum tax. I have no clue what to enter on that screen.  I do not think that l should leave it blank.  Can somebody Help please.

Thanks

If you are not subject to AMT, you can leave it blank.

If you were, TurboTax would have calculated the AMT Tax for you and you would have Form 6251 in your return.

Since we can't see your return in this forum, click this link for more detailed info on Alternative Minimum Tax. 

Here's more info on How to Report Sale of Rental Property.

Our renter vacated our rental property in Sep 2021. In Oct 2021, we decided to sell the property and started major renovations. The renovations completed in Jan 2022 and the house sold and closed in Feb 2022.  Do I need to add the cost of the capital improvements from the renovation to my 2021 tax return?  This would probably account for 80% of the cost since it was completed in 2022.  Can the capital improvements be added when I do my 2022 taxes and enter the sale of the rental unit?

No, the capital improvements are not added to your tax return they are added to the basis of the property. You will use the basis of your property to calculate your capital gain/loss on the sale when you file your 2022 tax return.

Examples of capital improvements are:

• Remodels and room additions (including decks and porches)
• New or upgraded landscaping, irrigation, sprinkler system
• Hardscape such as pavement, block or retaining wall, patio
• Fencing
• Swimming pool, spa
• Storm windows, doors
• New roof
• Central vacuum or security system
• Upgraded wiring, plumbing, ductwork
• Central heating, AC, humidifier
• New furnace, water heater
• Filtration, soft-water, or septic system
• Built-in appliances
• New flooring or wall-to-wall carpeting
• Upgraded insulation
• Satellite dish

You have to report rental expenses the year they occurred (credit card see instructions). Capital improvements are depreciated in your return on rental/business property.  If you lived in it 2 years and owned for at least 5 years and currently occupy the property (check how long you had to currently  live there) you have to claim capital gains on any rental property time after 2009.

The capital gains exclusion requires occupancy by owner.

 @37Chief

As LeonardS said, improvements increase your cost basis in the property and should be entered as a new Asset for Depreciation. However, you would not add the asset until it was placed in service. In your example, renovations begun in 2021, but not finished until 2022 would be added on your 2022 return. This additional basis would reduce any capital gain from the sale of the property.

They are added to the basis only if they are not considered still rentals.  Otherwise they have to added as depreciated capital expenses in Schedule E, so for what the person spent in 2021 it will take depreciation and in 2022 when it was sold as a rental still the same method is used and when the calculations are done by turbo tax it will take the balance of depreciated items off automatically.  Unless they moved back in and are delcaring it as their primary residence and qualify for the exclusion and the repairs/improvements were done while they occupied the home would they add them to the basis otherwise they have to treat it has a rental expenses even if it was vacant at the time and then sold. 

In the end it comes out the same but it's a matter of how IRS classifies the property.  Doesn't sound like they qualify for the owner exclusion as they didn't say they moved back into the property and occupied it for the qualified period prior to the sale, it that case it is still a rental albiet vacant at the time of sale.  They have different reporting requirements on capital improvements and how it's added to the basis upon the sale not to mention the expenses spaned 2 tax years.

The renovations were not completed until 2022 at which time they would be placed in service if the property was still available for rent. Depreciation does not begin until an asset is placed in service. That must be decided on by the owner (not the case for @37Chief since they decided to sell in 2021).

In this situation the capital improvements could be added to the sales expenses so that the proper gain is reflected on the sale as it is reported and entered into the asset section of the rental activity.

@DiddlyD

It was placed in service when the renovations were completed/installed and ready to be used..... it is not until they get a renter.  They need to report the sale through Schedule E since it was never owner occupied before the sale.  All they had was a vacancy period in their rental regardless of their future intent.   I reported the sale of a rental in Turbo Tax CD version on my Schedule E, It then reported the sale of a business assest as it should.  I did include" all" capital improvements over the life of ownership in with the "basis" even those  I depreciated  which I received a tax deduction that year as well but then the recapture of depreciated takes care of any double tax credit to determine the capital gains (this is if you didn't occupy it 2 yrs out of the last 5 years before selling to get the capital gains exclusion).