1099-S for inherited property

[RoyD]

Thanks very much for your help with this.  I have received a Form 1099-S for the proceeds of an inherited home sale.  That home was sold right away so I'll not have a gain, and the info needed to adjust for broker fees and other sales expenses are listed in the title company final seller's statement.  However, I don't know how to enter in turbotax the real estate taxes that were paid by the title company and listed on the final seller's statement, including the buyers' part of those real estate taxes shown in Box 6 of the Form 1099-S

[MarilynG1]

You can claim property (real estate) tax you already paid for the calendar year, minus any amount allocated to the buyer. It doesn’t matter if you were reimbursed for the buyer’s share at the close of escrow or not—you can only claim your share of the property (real estate) tax for the time you owned the home.

Here are two ways to see what you were reimbursed:

• It's in Box 6 of Form 1099-S
• Look for "property tax," "real estate tax," or “county taxes” on your HUD-1 settlement statement

Click this link for more detailed info on Property Tax on Home Sale. 

@RoyD 

[RoyD]

Thanks, I have completed the information in the investment section of TurboTax (for an inherited home) but didn't see a place in that section to enter the property taxes as you have outlined in your response.  I'll now enter the net amount in the "Taxes on additional homes or land" section, with an attached note.  Incidentally, I'm using TurboTax Deluxe which seems to be handling this just fine; though help screens in this section have said that I need to use TurboTax Premium.  Thanks again.

[GeorgeM777]

Yes, you will have to upgrade to TurboTax Premium to complete your inherited home information.  In TurboTax Premium, there is a section dedicated to the sale of a home, and it can be found in the Your income and expenses screen under the sub-heading, Less Common Income.  As you move through this section of the application, there is a screen, Sales Information, where you can enter your sales expenses.  

Any gain on the sale of the home will be considered a capital gain (here, it looks like a short-term) and is taxable income.  If you sold the inherited home for a loss, that loss can be deducted as a capital loss provided you sold the home in an arms length transaction, you did not sell it to a related party, and you and your siblings did not use the home as a personal residence.  

This sale will appear on Form 8949, Sales and Other Dispositions of Capital Assets and Schedule D, Capital Gains and Losses. 

@RoyD 

[RoyD]

Thanks for your reply and I appreciate your help.  I had previously entered the information about the sale of this inherited property (from the final escrow statement and the 1099-S) as follows and it seems to be included as you describe even though I'm using TurboTax Deluxe rather than Premium.  The information is included on a separate Form 8949 (separate from my other investment activities) and on Schedule D from Box C on that form.  FYI, the property was sold right away once it was inherited, so there is no gain or loss.  The process that I used is outlined in the bullet list below.  Finally, I am a resident of a different state than the one in which this property was located and will need to file a return for that state as well.

• Added the sale in my investment screen.
• Selected  "no" to whether I received a 1099-B.
• Shown as "Inherited home" on the Form 8949.
• Entered property tax info, including the Buyers Part, in my property tax screen.
• I haven't yet entered the small amount of mortgage interest shown on the escrow statement.

My question becomes what am I missing by not upgrading to Premium?  And if it is important to upgrade, will the information already entered be brought over to the new program return?

Thanks, I look forward to hearing back. 

[RobertB4444]

That is everything that you need to enter.  If it is letting you slide in deluxe then you're good to go.  Just don't be shocked if it makes you upgrade when you go to check out.

@RoyD 

[RoyD]

Thanks so much to all of you for your help and advice.  I now believe that I should have addressed all of this from a bigger picture perspective, rather than simply focusing on the inherited alone.  I live in one state and am dealing with the small estate of my brother who died last June in another state.  My sister is the executor (aka personal representative) and we share the proceeds equally between us.  The estate tax return has yet to be completed for that state; and, accordingly, I do not have all the estate information as of now.  Hopefully, it will be completed in the near future and I'll be able to complete my federal, home state, and the other state returns soon.  If not, I'm considering filing estimated returns.  It now occurs to me that it is best to upgrade to Premium to help guide me through all of this.  Is that the case?  If I do upgrade now, will upgrading via my existing "downloaded" Deluxe version preserve and bring over the data I have entered so far into the upgraded version return?  Thanks in advance for your help.

[AmyC]

You don't want to file estimated returns. You may want to file an extension for your personal return while waiting on the estate and the k-1. This would give you an extra 6 months to file the correct information. If you believe you will owe money on your return, go ahead and make a payment by April 18, 2023 using Pay Online.

If you have a tax situation that requires an upgrade, the program will tell you.

As for upgrading online, you just click the upgrade button. It will instantly change your program and all your information is part of the upgrade. Upgrading is easy. Downgrading is not. You would have to clear all of your information and start over. 

Reference:

How do I file an IRS extension (Form 4868) in TurboTax Online?

[RoyD]

Thanks again for your help.  My return will include my proceeds from the sale of my deceased brother's home, that home was transferred to my sister and I via a TOD deed. That sale happened shortly after his death and I have the form 1099-S and Final Seller's Statement from the Title company.  Do I report my share of the Real Estate Taxes and the mortgage interest included in that Seller's statement in the real estate tax and mortgage interest deductions of my return or are these items simply included as part of the sales expenses and fees reported for that sale?

[Vanessa A]

Do I report my share of the Real Estate Taxes and the mortgage interest included in that Seller's statement in the real estate tax and mortgage interest deductions of my return or are these items simply included as part of the sales expenses and fees reported for that sale?  It is likely that the sales expenses and fees include the interest and taxes.  However, you would need to look to verify that they are part of the total.  If the sum of all the sales expenses and fees include the taxes and interest, then you would not add them in.  If when you add up all the numbers on the sheet you are short by the taxes and interest, then you would need to add it in and claim the expense.  

[RoyD]

Thanks for your quick response.  The property taxes and mortgage interest are included in the total debits for selling expenses and fees shown on our Final Sellers Statement.  Accordingly, your advice is that I don't need to break those two items out separately in my return, that they will simply be included and reported as part of the total selling expenses and fees in this transaction.  Is that right?  Thanks again.

[TeresaM]

Yes, if the expenses for property taxes and mortgage interest are included in the selling expenses, you do not need to enter them in another place. You will retain the specifics with your tax documents, so if there is ever a question of the components of the selling expenses, you have them available. 

[RoyD]

Thanks for your continued help with all of this.  In my case, a portion of the property taxes were credited back to me in the Final Settlement and I believe this credit should reduce the amount of property taxes included in the selling expenses.  The amount credited back is shown in Box 8 of the 1099-S.  Do you agree?

Thanks again for your quick responses.

[HopeS]

Assuming you meant Box 6 since the Form does not have Box 8, see instructions for Box 6 below:

For a real estate transaction involving a residence, enter the real estate tax paid in advance that is allocable to the buyer. You do not have to report an amount as allocable to the buyer for real estate taxes paid in arrears. You may use the appropriate information included on the Closing Disclosure, or comparable form provided at closing. For example, a residence is sold in a county where the real estate tax is paid annually in advance. The seller paid real estate taxes of $1,200 for the year in which the sale took place. The sale occurred at the end of the 9th month of the real estate tax year. Therefore, $300 of the tax paid in advance is allocated to the buyer, by reference to the amount of real estate tax shown on the Closing Disclosure as paid by the seller in advance, and is reported in box 5.

IRS instructions Form 1099S