First off, I've been using TurboTax for 20 years, and am very comfortable with the process of the software, so the fact that I'm uncertain in this instance is very . . . hmmmm, . . . disconcerting. LOL! 🙂
Second, it seems like TurboTax is neither calculating the Capital Gains on the sale of my Rental Properties last year, nor is it asking me to do so manually, nor is it informing me at the end of processing my return that said calculation remains to be done. So to me, it seems like it's completely ignoring the situation. Scary. 😉
So, here are the specifics, and what I've done in TurboTax so far:
I sold two rental properties last year that were each originally my primary residences at the time that I purchased them, but were later converted to rental/business use after I moved. Both of them have remained 100% rental/business use for at least 10 years.
I sold both at substantially higher prices than that for which I purchased them, and both appear to be sold at a profit. I say "appear", because I'm not a tax expert, and I may be misunderstanding something. However, I *expect* that there is likely a capital gain for each sale, with respective taxes owed.
In the business portion of TurboTax, I indicated that I sold the properties, and entered their dates of sale, as prompted in each of the properties' respective depreciation sections. However, TurboTax never asked for the sale price. Date of Sale, and no field for Sale Price. ??? Hmmmm. As such, I expected to either come across that question/field later in the data entry process, or at least to be prompted to enter this information during the Error Check section at the end.
I went back through both the business and personal information sections of the data entry process several times to see if I had missed anything, and I don't see anywhere that I could enter the necessary information for the calculation of capital gains on these sales, even if they qualify for exclusion(s), which, although I would love to be the case, I significantly doubt. 😉 However, I would love to be pleasantly surprised and find that I owe no capital gains tax on these sales! Fine with me, but again, I doubt it. LOL!
Anyway, hopefulness for exclusions aside, TurboTax does not appear to be calculating the capital gains on these sales, and I'm at a loss as to where to go from here. I could just submit the return as is, and hope for the best, but I'd rather not be surprised by an audit that says I owe $5,000, $10,000, $30,000, my first-born child, etc. Ha! And not just because I have no desire to go through the auditing process! 😉
So, sorry for the novella-length question, but any and all help would be greatly appreciated. Thanks!
So, the answer appears to be that, yes, TurboTax has a major flaw at this point. 😕
Never got any sort of reply on this forum, so I dug into the tax code . . . yes, the actual nightmare of the code itself . . ., and did all the calculations by hand. Well, by Excel, at least. LOL!
And then opened up the Forms section of TurboTax, and manually entered everything. 😕
At the end of the day, I now owe . . . sigh . . . $14,000 in Capital Gains taxes from the sale of those two properties. :(
I'm not sure whether I'm glad I didn't trust TurboTax (and so not be open to problems with the IRS), or whether I'm sorry I didn't just trust TurboTax and perhaps inadvertently get away with $14,000. LOL! 😉
Either way, though, it's frustrating that TurboTax would have let me file the way it was, telling me that everything was fine and without errors. $14,000 ain't no chump change. :( At least, it isn't to me. TurboTax, that's a seriously big whole there!!!!
For each property, indicate under the Property Profile section that the property was sold before moving onto the Sale of Property/depreciation section. Try that to see if it affects your calculations.
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This is a detailed post. I liked it. These days I am concerned about my money and would like to do personal financial planning of my own so have been finding some recommendations for best apps that are trustworthy.
You are absolutely right. Turbo Tax dropped the ball when it comes to computing capital gains on sale of rental property (including itemizing improvements to the property to adjust the gain). I have been trying to figure this out for hours with no success. This is not a good situation to be in.
You do realize you just posted to a thread that is 3 years old right ???
The 2020 program is far from fully functional and will not be until sometime in February for the forms you need ... click on the REVIEW tab to see which forms you are still waiting on and when they are estimated to be ready. The 4797 will not be ready until at least 1/21 and the Sch D not until 1/14 at best.