I have a rental property that I sold. I lived in the property from 5/2019-12/2021, I rented it starting 1/2021 and sold it 8/2024. Should it be sale of business or home?

Forum|Forum|1 year ago
February 2, 2025
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I know I shouldn't be paying any capital gains taxes. I'm struggling to figure out whether it should be listed as Sale of business property OR sale of primary residence. I also need guidance on what should be included in the calculations. Thank you for your help!

pk12_2

Employee

@natalierose28 , unless you are quite familiar with and ready to use a higher version like Windows download/CD Home and Business, you are probably safer to use a tax professional.

What you will need to do :

(a) first tell TurboTax that you have sole an income property -- note this is in addition to Schedule-E where you are recognizing the rental income/ expenses/ depreciation etc.

(b) while doing the 4797 you have to make sure that you include any suspended ,losses associated with Schedule-E.

(c) After the gain has been computed, gain upto accumulated depreciation would show up on your 1040 as ordinary income. The rest of the gain would show up on Schedule D .

(d) On Schedule-D you can now exclude 250,000 ( 500,000 for joint filing ) -- assuming you have met the 2 year ownership plus 730 days of primary use ( by both if joint ).

It is not straight forward. But the savings is worth it.

Is there more I can do for you

natalierose28Author

My understanding is that turbotax has the capabilities to achieve this. I just need guidance on what to click. You mentioned several forms but it would be helpful to have instructions on how to achieve this using turbotax. thank you!

pk12_2

Employee

@natalierose28 , sure. Can walk you through the screens ( assuming that you are on Windows TurboTax -- I am on Home & Business and so my screens should be pretty similar.

Give me your details --- Date of purchase/ acquisition; Date of Sale ; Acquisition Price; Sales Price; Date of con version to Rental, approximate cost of land under the house; Date of Sale etc. Note that the dollar figures can by dummy ones ( generally in the range of actual ); your own filing status ( single or joint).

Once I hear from you I will create the scenario and then walk you through screen by screen ( approx. and important ones ).

Waiting to hear from you --yes ?