Sale of Rental 2022, and how to pay captial gains

[phyzx]

I entered all my standard taxes into TurboTax Premium 2022. Then I am have gone back to post the rental sale.
I donated or gave away all assets on the property. I am thinking that those things I did not make any profit on so I am done reporting on those.

I need help and have paid for Turbotax support. I am at the TT Premier/Federal Taxes/Wages and Income/Section 179 special depreciation. I am thinking I only have to edit the 'rental house' item.

If there are simple answers and which entries to make  then I can follow and can do this.

I keep seeing depreciation calculations and legal instructions but no clear finality so I am thinking of putting a support call in. I bought TTpremier hoping that this would handle what has to be done.

Thank you any any help or leads.

[Carl]

If you report the sale in the SCH E - Assets/Depreciation section of the program, then the program (not you) will take care of *all* depreciation capture for you.

[ThomasM125 · Accepted solution]

Anything you gave away you wouldn't have to recapure depreciation on since there would be no gain on the sale of them. So, you just need to allocate the sales proceeds to the house and land. The portion that you say belongs to the house will result in depreciaton recapture up to the amount of depreciation allowable over the years, or the gain, whichever is less. You will pay ordinary income tax on that, up to a maximum of 25%. The gain on the land will just be at capital gain tax rates, since there was no depreciation on the land.

So, just report the sale of the house and allocate the price to building and land. Also, if you had any assets the were not fully depreciated, you can report the sale of them for $0 so that you get the balance of depreciation on them deducted.

[Carl]

Also, if you had any assets the were not fully depreciated, you can report the sale of them for $0 so that you get the balance of depreciation on them deducted.

Nope, that won't work. I've already confirmed it. If you report the sale of a depreciable asset for $0, then the depreciation will be included in the gain and taxed at the capital gains tax rate, instead of being recaptured and taxed at the ordinary tax rate. Work a scenario and check the forms. You'll see exactly the same as I did.

For assets not sold or retained, but were given away, simply indicate that you stopped using that asset 2022. Then on the "Special Handling Required?" screen select YES so you are not prompted for sales information. That's all you need to do, and there's no depreciation recapture, and any depreciation already taken on that asset does not get included in your capital gain one the sale of the land/structure.

[phyzx]

Hello,

Thank you for the depreciation of items answer. This will make that part very simple to zero those.

The question I have still is where is the split of depreciation on the house and the land recorded? The property is a standard suburban home.

I have my property sales documents to review this and not sure where to find the figures.

Thank you again.

[Carl]

The question I have still is where is the split of depreciation on the house and the land recorded?

Land is not depreciated. Only the structure(s) on that land get depreciated. If  you'll elect to edit/update that asset, one of the screens will show you how it's done.

COST - This is what you paid for the property (land and structure) when originally purchased.

COST OF LAND - This is the amount of "COST" that you allocated to the land when you first set this property up as a rental. Example:

COST: $100,000

COST OF LAND: $30,000

The above indicates you paid a total of $100,000 when you originally purchased the asset, and that $30,000 of that $100,000 was allocated to the land. So you have a 70/30 split with 70% of your cost bases for the structure, and 30% of your cost basis for the land.  You should split your sales price for that asset the same, using a 70/30 split. Since you sold at a gain, make sure the sales price you assign to each, is more than the cost basis originally assigned to each. You should also split your sales expenses between the land and structure using the same ratio.

So for each asset the gain would be figured as sales price, minus cost basis, minus sales expense. The result should be a positive number and is the amount of your gain.