I sold a rental property and Turbo Tax is correctly calculating federal ok (4797, D, E). But my state return Is adjusting the entire cost basis out for a huge credit

Forum|Forum|1 year ago
March 23, 2025
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There should be no gain adjustment, just the federal gains in box (C) and the fed and state depreciation in (D). But it's putting the entire cost basis as an adjustment in (E) so I get a huge credit. I need to get rid of that adjustment but can't edit manually in online version

RobertB4444

Please clarify - what state software are you working in?

@halioris

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haliorisAuthor

when you say which state software I'm not sure what you mean... I am using Turbo Tax Premium online for Federal and State. It transfers info automatically over to the state return. The Federal return is fine, it has correctly calculated capital gains on both land and house after sale and brought into appropriate lines on the 1040. However on my Kentucky State return it has incorrectly completed Schedule M because it put the entire cost basis of the land and the house on Schedule A (Federal/State Adjustment Summary) giving me a huge credit. The house cost basis was listed as an adjustment on (E) Gain adjustment as a negative number and the land cost basis was listed at the bottom as Passive/At-Risk/Other Adjustments. That Schedule A has these numbers in it:

(C) Federal Loss/Gain - my gain on the house portion of the sale

(D 1 and 2) - some accumulated depreciation numbers I'm not really sure where they came from but not overly concerned with them (federal number I know came from fed return, not sure where stat number came from)

(E) Gain Adjusment - the entire cost basis of house portion as a negative number

(G) Total Adjustments = D1 - D2 + E (a huge negative number)

Passive/At-Risk/Other Adjustments - a negative number of the entire cost basis of the land portion

Total Sale of Asset Adjustment = G + above passive adjustment (even huger negative number)

That large number was then divided across my wife and myself and placed on line 9 of "Kentucky Other Subtractions Worksheet - Attach to Schedule M" and added to line 3 Passive activity loss adjustment. That total was put on Schedule M line 14 which in the end carries forward to my 740 and takes all my income away and gives me a big refund.

Any insight would be great, at this point I fear I'm not going to be able to use TT to file state and will have to print it all out and take it to a tax preparer which I'm hoping to avoid.

Chris

AmyC

Employee

The KY program asks about federal and state differences several places. I assume you entered the negative adjustment to the basis in one of those places. Review your answers to locate the errant information.

KY sch A is itemized deductions. Mortgage interest, charity, etc. I am not understanding your sch A description. Do you mean another form?

State depreciation can vary based on the dates - 2011 is one big date and another would be residency established. You also have variation is depreciation allowed based on incomes and allowed depreciation types. Schedule M line 3 shows special depreciation allowance of 30% or 50% allowed on federal along with Sec 179 taken. These numbers should be pulling in from the federal and be fine.

The gain adjustment is the most reasonable starting place. See if you can backtrack through your paperwork and the program to determine where that number came from - is it something you entered or the program carried over and work your way through.

Be sure to view all your worksheets, not just the forms.

To print or view your forms:

In desktop, switch to Forms Mode.
For online:
1. On the left side, select Tax Tools
2. Select Print center
3. Select Print, save or preview this year's return
4. If you have not paid, select pay now.