Sell of Rental Home

Forum|Forum|2 years ago
February 24, 2024
1 reply
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Purchased house for our daughter who paid the mortgage. When she was done living there, we converted it to a rental property. We sold the house in 2023. Turbo tax asks for the purchase date, the in-service date and cost. For the cost do I use the basis (initial cost + improvements made) of the house when we converted from personal to rental? Seems logical but wasn't clear when going through the questions.

Mike9241

as cost you use the actual original cost + cost of improvements. the lesser of the gain or depreciation allowed or allowable must be recaptured as section 1250 gain. if you did not take depreciation see a tax pro.

example

selling price 100,000

selling expenses -10,000

net 90,000

cost + improvements- 60,000

depreciation allowed or allowable -8.000

tax basis for gain 52,000

gain (90K-52K) 38,000 of which 8K is taxed as 1250 gain and $30K is taxed as long-term capital gain