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

[MikeP3]

I have filled out the sale info for a residential rental and a commercial bldg rental. Everything seems to flow through except I have always been told about depreciation recapture. I put in the asset information in and the depreciation amounts show correctly with the gain being the Sale Price less Selling Costs and less net depreciated basis (Bldg cost less acccum Depreciation) 

I saw on internet that there is no recapture if straight line is used and no bonus depreciation taken. Is this correct and if not why is Turbo Tax not doing any recapture. Am I missing an entry somewhere?

Appreciate any help.

Mike 

[GeorgeM777]

Well, maybe.  When straight-line depreciation is used, gain from straight-line depreciation is treated as “unrecaptured” Sec. 1250 gain.  When accelerated depreciation (i.e. bonus depreciation) is used for real property, only the difference between accelerated and straight-line depreciation is subject to depreciation recapture.  

Depreciation recapture is taxed at ordinary rates.  Unrecaptured Sec. 1250 gain is taxed at a maximum 25% rate.  Capital gains are taxed at a maximum 20% rate.  Therefore, from a tax perspective, it is better to have gains that are capital gains, rather than depreciation recapture.

@MikeP3

[phung32524143]

Can I use Premier to report sale of a rental home? It is in a personal LLC for rental property. 

[zenmster]

is this still applicable to TT tax year 2021?

[zenmster]

are these the same instructions for TT 2021 DESKTOP for Mac?

[zenmster]

So my realtor paid for over $30,000 in fees then charged me for repairs, new appliances, wood floor refinishing, repairing decks etc.  I enter all this in "Your Property Assets" and not as expenses? 

[papa281]

I hope you can help.  Using turbo tax Home & Business

to report the selling of my rental condo, I first have to go through all of the assets--So you go to your Asset/Depreciation and click on UPDATE.  Then it takes you to your Asset Summary (List of all Assets).  Then you go to EDIT on each asset and click on CONTINUE.   Then it asks if the asset of sold, stolen, etc.  you click YES.  Then it goes to Disposition info (Date of Sale and Date Acquired.  Then if goes to the Special Handling Screen you click NO (even though the last question is "This asset was a rental, a home office, or a home office improvement within a home.  After clicking NO it goes to Enter Asset Sale Info--Sales Price and Sales Expense.

Question #1-- if the asset was included in the sale of the Rental Condo, what amount would you put in the Sales Price and what amount would you put in the Sales Expense?

Question #2--When you get to the Asset (the Condo itself, would the Sales Price be the amount you are selling the Condo for?  And in the Sales Expense would that be the initial cost of the condo plus improvements, assessments, (is there anything else)---Is this correct.  If not can you please advise.  I would deeply appreciate any help.   The Turbo Tax Help does not real explain this very well.   [email address removed]

[Cynthiad66]

No.  Purchase price plus improvements is not considered Selling Expense in the computation for sale of the condo.

Question 1 - The sales price is what you actually sold it for.  You may have to make some calculations if there were several assets included in the sales price.  But it is what you are selling that particular item for.

Question 2:

The sales price is the amount the condo was sold for.

Selling expenses does not include the cost of the condo plus improvements.  Purchase price plus improvements is considered the cost or basis in the condo.

Selling expenses can include transfer taxes, stamp taxes, sales commissions paid to a real estate agent, any fees for a service that helped you sell your home without a broker, advertising fees, legal fees, and any mortgage points or other loan charges you paid that would normally have been the buyer's responsibility.

Follow the instructions below.

1. Click on Income & Expenses
2. Under Your income and expenses, scroll down to
3. Rental properties and royalties, click Edit/Add
4. Do you want to review your rental?, click Yes
5. Under Rent and Royalty Summary, click Edit
6. Click Update to the right of Assets/Depreciation.
7. Do you want to go directly to your asset summary?, click Yes and Continue
8. Click Edit to the right of each asset to be disposed
9. Go through several screens until you get to Tell Us More About This Rental Asset
10. Click on This item was sold…….   And continue to answer the questions

You might also review information here.

@papa281

[DiddlyD]

i just went through this and filing the sale of rental property is complex and if you have no tax preparation background, you should find yourself a "Reputable CPA who will prepare your taxes personally and take responsibility for it's accuracy too" not have his helpers do it.  Capital gains and recapture of depreciation along with all the other things you have to know how to process including state as well, TT has it's own worksheets and hard to understand to risk a DIY preparation, one wrong entry could cost you thousands, I know I had to amend and it was because TT didn't import all my prior rental depreciation that's a whole other story.  That's my recommendation to you.

[papa281]

Question 3— what do you with the cost basis ( initial cost plus improvements).  Does that get subtracted from the selling price?  Or is there something else you go with it?

Thank you 

[DiddlyD]

Once again, if you are asking these basic questions, you should seek a professional to do your taxes at least for this tax return.  This forum does not provide tax professionals; they are just people and you maybe risking thousands of dollars trying to DYI and relying of peoples responses when they don't know your personal tax situation.  

[HopeS]

In response to question 3, the cost basis should be shown on your Depreciation Detail report. If you were using TurboTax in prior years you should be able to see the "Cost Basis" since they would be listed on the detailed report that supports Form 4562.  Your prior years' improvements should have been depreciated or expensed in the year of the improvements. If these were expensed then they would not be added to your Cost Basis since already expensed. If depreciated, then you would add these to the Cost Basis (see detailed depreciation report).

If you did not use TurboTax in the prior year then you would need to get this information.

Both Form 4562 and the depreciation schedule are included when you print your return. If you are using the online version, you must pay before you can see your forms. If you have the desktop version, click on Forms Mode in the upper right corner.

Your gain or loss for tax purposes is determined by subtracting your property's adjusted basis (Cost -Depreciation) on the date of sale from the sales price you receive (plus sales expenses, such as real estate commissions).

@papa281 

[papa281]

Hate to bother you with these questions.  If you have been reporting on your tax return a rental that you only rent for a few months each year but because your AGI is over the limit you are not getting any deduction on you return.  Does it pay to turn it into personal use and not rent it?  And what happens when you do this?

Thanks

[DianeW777]

It's tax planning which helps you prepare and decide what action to take.  If you rent real estate property at a loss it is considered a passive activity with special rules.  A passive activity loss can be taken up to $25,000 a year if the income qualifications are met.  If the income is too high then the loss is carried over until used up or until the property is sold at which time the entire loss is deductible.

Phaseout Rule: The maximum special allowance of $25,000 ($12,500 for married individuals filing separate returns and living apart at all times during the year) is reduced by 50% of the amount of your modified adjusted gross income that’s more than $100,000 ($50,000 if you’re married filing separately). If your modified adjusted gross income is $150,000 or more ($75,000 or more if you’re married filing separately), you generally can’t use the special allowance. This is because the special allowance is reduced to $0 since the modified adjusted gross income is over the $100,000 amount.

If  you choose to convert the property to personal use, then the depreciation will still need to be recaptured when the property is sold.  You will need to retain your records until you sell the property.  Likewise the suspended passive activity losses (PALs) can be use in only two circumstances:

1. Against passive-activity income
2. When you dispose of the passive activity in a fully taxable transaction to an unrelated party

When you convert rental property into a personal use home. The rental home may have suspended passive-activity losses. You can continue to deduct the suspended passive-activity losses from other passive income. If you have no other passive income, the suspended losses remain suspended. Carry them forward until you sell the home in a fully taxable transaction.

@papa281 

[papa281]

Thank you