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August 9, 2022
Question

Hello,I am interested in starting my 2020 tax preparation. I am selling a rental property and have a huge loss from the tenant but a capital gain from the home.

  • August 9, 2022
  • 4 replies
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4 replies

August 9, 2022

for starters, you can't use the online version of turbto tax to complete your 2020 tax return.. Online only accomodates 2021 taxes returns (and that will shut down in October).  

 

You must use the desktop version

 

https://turbotax.intuit.com/personal-taxes/past-years-products/

 

not sure what you mean by 'huge loss from tenant', but that can be addressed once you begin the tax return.

 

 

August 9, 2022

Sorry my mistake, I meant 2022, not 2020. 

Employee
August 9, 2022

@cabrerag9505 wrote:

Sorry my mistake, I meant 2022, not 2020. 


The software for the 2022 tax year is not yet available (and will not be until late October, at the very earliest).

 

Further, the forms you will need (as well as the software) will not be finalized until some time in January. 

Carl11_2
Employee
August 10, 2022

I am selling a rental property and have a huge loss from a tenant....

Can you clarify that?  How can it be that you have a loss from a tenant?

VolvoGirl
Employee
August 10, 2022

If the tenant is behind paying the rent you will just have less income to report.  You can't deduct rent not paid.  

Employee
August 10, 2022

or did the tenant cause unreimbursed damage? 

August 10, 2022

Understood, the tenant is behind about 7K, so just report lesser income?

Employee
August 10, 2022

For planning purposes only, you can use turbotax online, which is the 2021 version.  It is "free to start."  Just make sure you don't actually try to file a return.  The 2021 version will go offline and you will lose all your data entries sometime around October 20, then Turbotax online will come back for 2022 in November, even though it won't be finished and ready to file until mid-January.  

 

The online version won't give you access to detailed forms, just a bottom line dollar figure.  You can get detailed access to the forms if you buy Turbotax to install on your own computer, but you would have to buy the 2021 version.  Then you would have to buy the 2022 version when it comes out and enter all your data again, so it depends if the planning ability is worth paying double for the software.

 

"Loss from a tenant."

 

Lost revenue because they did not pay rent is not a deduction.  You just have less income to report.  Expenses to repair tenant damage is a complex issue.  Expenses while the property is being held out for rental are rental expenses.  If you made repairs after the tenant moved out, thinking you would re-rent, they are rental expenses and can be deducted from the rent paid.  If your expenses are more than your rent income, you have a loss.  Unfortunately, this is a "passive loss" and can only offset other passive income (like from other rental properties); passive losses usually can't be deducted against other income.  But you can "suspend" the loss and take it against future passive income, such as if you buy a new rental property in the future.  See here for more,

https://www.nolo.com/legal-encyclopedia/can-you-deduct-your-rental-losses.html

 

If your repair expenses occurred after you took the house off the rental market, they are probably not allowable as deductions against your rental income.  However, you need to make a distinction between repairs and improvements.  An improvement is a property "betterment" that adds value or extends the useful life of the property, and must be permanently attached to the property.  A new roof or new carpet are examples of improvements.  Improvements are not deductible rental expenses even if carried out while the property was rented, but they add to the cost basis and will reduce your capital gains. 

 

"Capital gain"

Yes, you have to pay this.  Remember your gain includes depreciation recapture, which is taxed as ordinary income (up to 25%), then the rest of the gain is taxed as long term capital gains at 15% or 20% depending on your total income.