Sale of owner occupied rental property, capital gains

Forum|Forum|3 years ago
April 11, 2023
1 reply
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I sold my 3 family home in 2022. I lived in one of the apartments for 10 years. Do I have to treat this as 2 different sales? Would I put the portion of the house that was used for rental under the section for rental property sale and the portion for my personal home under the section sold a home? There is also a question under the rental section that reads "Special Handling Required. This asset was a rental, home office or home office improvement within a home. Would this be yes or no for me, the house was a 3 family apartment. Also will I be eligible for the $250,000 exclusion, is that only for my personal portion of the sale? Or can the whole house be entered under 'sold a home' and not separated?

Thanks

PatriciaV

Employee

It depends on how you have been reporting this property in the past. If you have entered one multi-family property that you also occupy, you would report one sale. But if you have been carrying this as three properties (one is your home, two are rentals), then you would report three sales.

The home sale exclusion would apply to that portion of the property that you occupied for 2 out of 5 years. The portion (or properties) used for rental purposes may result in a taxable gain. TurboTax will help you determine how the exclusion applies to your return after you complete the sale entry.

The answer to Special Handling is Yes, this asset was a rental.

The portion of the home used as a rental may or may not qualify for the exclusion of gain on the sale of a personal residence. To qualify it must meet several tests, one of which is the use test. The use test requires that you used the property as your main home for an aggregate period of at least 24 months in the 5-year period before the sale.

You report the sale of the entire home, including the rental, in the "Sale of Your Home section". To enter the sale information, search on "sale of home" from the magnifying glass at the top of the screen. Click on the "jump to sale of home" link. Answer the questions on the screens until you get to the "Sold a Home" topic.

You will also report the sale of any assets under Rental Properties and Royalties. Review the Property Profile first and check the box for "I sold this property." Then go to Sale of Assets/Depreciation to finish reporting the sale. Sale proceeds will need to be allocated among all the assets listed for the rental property.

Additional Info:

IRS Pub 523 Selling Your Home
IRS Pub 523 Business or Rental Use of Home
IRS Pub 587 Sale or Exchange of Your Home

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DW448Author

I have always reported as a multi family that I occupied. You said to answer YES to "Special handling required". If I answer YES, then I am not prompted for sale information, asset sale price, asses sale expense, land sale price, land sale expense. And it doesn't calculate any tax I owe for the rental portion at this time. If I say NO to Special Handling Required then I am prompted for the sale information and then it shows I do owe tax for the rental portion of the property. Which is the correct option here? Then also as you said I will report the total sale under 'selling my home' section, my living area portion plus the rental portion, correct? Thanks.

PatriciaV

Employee

Yes, report the sale under Sale of Home first. This process will determine how much of the sale falls under the home sale exemption. Follow the screens to the end of the section. Be sure to read any blue links on these pages to confirm you are reporting this sale accurately.

Then go to Sale of Assets for the Rental property and review each asset listed for the sold property. As stated above, profit from the rental portion may be taxable.

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