- Is there a guidance in TurboTax to deduct the loan
payment back on the first year?
You are allowed to
deduct as rental expenses interest which you paid on your rental property in
the year you paid it. The only way to claim it retroactively is to amend that
year's tax return. However, there is a time limit and you can only file the
amended return (Form 1040X) within three years from the date you filed your original tax
return or within two years of the date
you paid the tax, whichever is later.
Therefore, if you paid that interest 5 years ago (before the 2014 tax year),
you can no longer amend and your interest deduction is now lost.
- Is there a guidance in TurboTax to subtract the
payment (loan pay off) to the capital gain of the sell?
The loan pay-off
amount does not affect your capital gain or loss at the sale of the rental
property. The capital gain/loss is the difference between the sales price (less
selling expenses) and the cost basis of your property. Depreciation will be
discussed in your next question.
- Is there a guidance to calculate the depreciation on
the property that I had never done?
In the rental
section of TurboTax, there is guidance on depreciation of rental property which
is depreciated over 27.5 years. If you set up the property in TurboTax as an
asset and indicate the date the property was placed in service, then TurboTax
will calculate all the prior depreciation that should have been taken, and the
depreciation for the current year.
Your property is
subject to depreciation recapture, to the extent that there is a capital gain
on the property. When you sell the property, you must recapture all allowable depreciation and pay tax on it at the rate of 25%. The emphasis is on
allowable, this means that if you did not actually deduct depreciation (by
omission or by will), you will still have to calculate allowable depreciation for the whole rented period and recapture that amount of depreciation and
pay tax on it.
In your case, if you
never deducted depreciation, I recommend that you amend your tax returns for
the years 2014, 2015 and 2016 to claim it. Your rental profit in those years
will be lower and it may affect your tax in those years. Depreciation for the years
before 2014 cannot be claimed but you will still have to calculate it and
include it as recaptured depreciation when you sell the property.
To amend your tax
returns for those years please follow these links. You must start by amending
2014, then 2015 and finally 2016:
https://turbotax.intuit.com/personal-taxes/cd-download/amend/ty16/
https://turbotax.intuit.com/personal-taxes/cd-download/amend/ty15/
https://turbotax.intuit.com/personal-taxes/cd-download/amend/ty14/
Instead
of amended returns, another way to deal with this situation is to file form
3115, Application for Change in Accounting Method.
If you choose to do this on your own, I recommend you use
TurboTax Premier - Desktop Software https://turbotax.intuit.com/personal-taxes/cd-download/premier.jsp .
Because both of these methods involve a certain level of
complexity, I would like to suggest you consider using TurboTax Live, a new product offering that allows you to do your taxes
with live CPA or EA advice on demand and provide a final review with you. See
https://turbotax.intuit.com/personal-taxes/online/turbotax-live.jsp for more information.
- Which is the correct version I should buy?
If you choose to do this on your own, I recommend you use
TurboTax Premier - Desktop Software https://turbotax.intuit.com/personal-taxes/cd-download/premier.jsp .
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