My rental house was destroyed by fire but I rebuilt and then sold it. How and where do I enter all the expenses as well as the insurance reimbursements?
My rental house was destroyed by fire but I rebuilt and then sold it. How and where do I enter all the expenses as well as the insurance reimbursements?
No - I did not convert it to personal use because I still had renters and wasn't sure if the house was livable or repairable. So I filed 2016 with the house as being rented for the entire year.
That was a boo-boo actually. By the tax filing deadline (which was Apr 18 last year) you would have known by then. What I would suggest you do is one of two things (and doing it later won't prevent you from going ahead with your 2017 taxes). Either amend the 2015 tax return to show the property converted to personal use on Dec 31st of 2015. Or you can amend the 2016 return and show the property converted to personal use on Jan 1, 2016. You want to do this to stop depreciation for the entire 2016 tax year that you couldn't rent it out, even if you wanted to. WHen it comes time to sell the program (which you did in 2017) that year's worth of depreciation can hurt. But first, lets see what the yearly depreciation is, to see if it's even worthwhile to you. I assume you have a printout of your 2015 return. If you don't, then open up the 2015 tax file (using TurboTax 2015 if you didn't save it in PDF format). What you need is the printout or PDF that shows you everything; worksheets and all. Not just the forms "required to filing" or the forms "to keep for your records". You want everything. The PDF could easily be over 100 pages too. So don't let that surprise you. What you are looking for is the 2015 IRS Form 4562 for that property. There will be three of them for that property. One prints in portrait format, and the other two print in landscape format. Of the two that print landscape, you want the one titled "Depreciation and Amortization Report". On that 4562 you will at a minimum, see the property itself listed there. If you've done any property improvements they will be listed also. Under the "cost - net of land" column is the value of the structure. The "land" column shows the value of the land. The "prior depreciation" column shows the amount of deprecation taken *BEFORE* 2015. Then the "current deprecation" column shows the deprecation taken *IN* 2015. In order to get the total depreciation taken, you have to add those last two columns together. That total is what you have to recapture and pay taxes on, in the year you sell the property. Now we've been looking at the 2015 return. So in order to get the "correct" figure, if you deprecated it in 2016 (which would have been a bad idea since there is no rental income in 2016 to take that depreciation against) you need that same 4562 from the 2016 tax return. What's the current year's deprecation you see on the 2015 form 4562? Let's see if this is worth an amendment or not.
Carl, I don't think I need to amend anything. The property was rented through December 2016. Even though the fire occurred that same month. I may have misspoke the date earlier. The cost ( net of land) is $49776 which was the total cost of the property. 27.5 yr depreciation is $1810 per year with the prior depreciation of $15008.
If you didn't report your rental "at all" on the 2016 return, then you will have to enter everything manually on the 2017 return. If the figures you quoted are off the 2015 form 4562, then when entering the data in the 2017 program the prior year's depreciation already taken will be the sum of $15,008 plus the $1810 in depreciation for the 2015 tax year. The reason that number needs to be right, is because you have to recapture that depreciation and pay taxes on it, in the year you sell the property. If it's wrong, you can bet your sweet bippy the IRS will catch it (usually 2-3 years after you file) and audit you on it. If you did "NOT" report the rental at all on the 2016 return to show it's conversion to personal use, then at this point I really wouldn't worry about it. Don't recapture depreciation for 2016, since it wasn't rented out in 2016. Then, if you do get audited on that, all you have to do is amend the 2016 return to convert the property to personal use on Jan 1, 2016. That stops the depreciation. Of course, then you'll have to amend the 2017 return just to "show" you converted it back to rental property on the date the CO was issued.
The property WAS rented throughout 2016 and was declared as such. For that matter the insurance reimbursed me for 6 months rent so realistically it was rented through June 2017. I don't see why you want me to declare it as personal use any earlier than that date.
If the rental income for the time between the burn date and the date the CO was issued for the new construction was covered by the insurance, then you're right. There's really no need for tax purposes, to convert it to personal use at all. So you'll use the figures on the 4562 from the 2017 return you're completing now. I'm assuming you reported it as a rental for the entire 2016 tax year and showed it as rented all year weather you reported any rental income for 2016 or not. Normally, periods of vacancy between renters also counts as "days rented" too, even though you don't receive income for that short period of vacancy between tenants. Sounds to me like this will be easier than I imagined if my assumptions are correct, or at least somewhat close. - The property is shown as rented for all of 2016, regardless of the rental income received. - Depreciation was claimed for all of 2016 (even though it may not have all been deductible, due to the reduced rental income received in 2016 - even if no income was received at all, really.) Then on the 2017 return all you're really doing is entering the property as a new asset where you add all the prior depreciation (do not include any depreciation already claimed for 2017) to the value of the land. You don't include the 2017 depreciation because you're going to be deleting that old asset, after you get all the numbers from it for the new construction asset. Besides, neither asset was "in service" before the CO issue date anyway. Just make sure the "in service" date of the new construction asset is not a date before the CO was issued, and you should be fine.
I have a similar situation and I am confused by this answer. Everything I've read says to decrease the basis by depreciation, and your saying increase it. If I do this it will lower the gain, and therefore the taxes.
I think you're just not "getting it" yet. Took me awhile before I got it to. Basically you're recapturing the depreciation by adding it to the value of the land. Then you pay your taxes on that depreciation when you report the loss and insurance payout in the Casualty & Thefts section. It's important to click the links in the Casualty & Thefts section and read them. It tells you that you will reduce your loss by the amount of depreciation taken. That makes the "depreciation part" of the insurance payout taxable income. The program also gives you the option to defer paying taxes on that gain until the year you sell the property too, if you want. Remember, when reporting it in the Casualty & Thefts section you are NOT claiming a total loss of what you paid for the property. You DID NOT lose the land. Your loss, is the value of the structure ONLY, minus the depreciation already taken on it.
You MUST have done as outlined above in the comments, for this to work out and make sense to you.
If you qualify for
the "lived in 2 of last 5 years" capital gains exclusion, then when
prompted you WILL indicate that this sale DOES INCLUDE the sale of your main
home. For AD MIL personnel who don't qualify because of PCS orders, select this
option anyway, because you "MIGHT" qualify for at last a partial
exclusion.
Start working through
Rental & Royalty Income (SCH E) "AS IF" you did not sell the
property. One of the screens near the start will ahve a selection on it for
"I sold or otherwise disposed of this property in 2016". Select
it. After you select the "I sold or otherwise disposed
of this property in 2016" you continue working it through "as
if" you still own it. When you come to the summary screen you will enter
all of your rental income and expenses, even it it's zero. Then you MUST work
through the "Sale of Assets/Depreciation" section. You must work
through each individual asset one at a time to report it's disposition (in your
case, all your rental assets were sold).
Understand that if
more than the property itself is listed in your assets list, then you need to
allocate our sales price across all of your assets. You will only allocate the structure sales
price, you will NOT allocate the land sales price, since the land is not a
depreciable asset. Then if you sold this
rental at a gain, you must show a gain on all assets, even if that gain is $1.
Likewise if you sold at a loss then you must show a loss on all assets, even if
that loss is $1
Basically when
working through an asset you select the option for "I stopped using this
asset in 2015" and go from there. Note that you MUST do this for EACH AND
EVERY asset listed.
When you finish
working through everything listed in the assets section, if you ever at any
time you owned this rental you claimed vehicle expenses, then you must also
work through the vehicle section and show the disposition of the vehicle. Most
likely, your vehicle disposition will be "removed for personal use",
as I seriously doubt you sold your vehicle as a part of this rental sale.
I have a question on rental property that had two separate fires. The rental property in question had a fire in late 2018, we started the rebuild process, then had a second fire in fall of 2019. We sold the property in early 2020 and had no reimbursement from the insurance company on loss of rental for 2020. I have put this property in the rental section and get to the sale of the property, but because the sale was considerably less than the purchase price, I am told I don't have to report it. The same goes with the Casualty Loss. We received a 1099-S for the purchase of the property, so I am a little confused as to what to do with this rental property.
For 2020, it was not rented so you need to go into each asset and mark that it was sold for $0 except for the house. You are saying that the cost basis of the house minus depreciation over the years is greater than the sales price. The program should still be taking the information and counting it. A loss is deductible. See Sales, Trades, Exchanges