Sale of Rental House in Turbo Tax

Forum|Forum|4 years ago
March 29, 2022
2 replies
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Please help - what is the difference between the selling of a rental house from the Rental Sale of Property/Deprecation area or from the Business Sale of Property in Turbo Tax Premier. I have read every question that was posed about this already, but I'm not getting any clarity on how to handle the two ways to report a sale of a rental home. If I approach it from the Rental Sale of Property/Depreciation, I cannot find anywhere to add the basis to the house over all the years I've owned it.

DianeW777

To clarify:

Is your rental house listed as an asset in the rental activity? This is where the sale should be taking place and data entered.
Is it fully depreciated? This would mean it has been depreciated over 27.5 years which is the recovery period used since 1986.

Assuming the rental house is listed under your assets in the rental activity, the steps below will show you how to enter your sale.

Use the original cost of each asset listed on depreciation, add those together then divide each one by the combined total to find the percentage of the cost for each asset. Use that percentage times the sales price and sales expenses to find the selling price/sales expenses for each asset.

Example: Original Cost (of each asset on your depreciation schedule)

$10,000 Land = 13.33%

$50,000 House = 66.67%

$15,000 Improvements = 20%

$75,000 Total = 100%

Multiply each percentage times the sales price/sales expenses to arrive at each individual sales price/sales expense.

I hope this example provides clarification to enter your sale.

You need to dispose of the property by telling TurboTax how and when it was disposed of. Follow the instructions below.

Click on Income & Expenses
Under Your income and expenses, scroll down to
Rental properties and royalties, click Edit/Add
Do you want to review your rental?, click Yes
Under Rent and Royalty Summary, click Edit
Click Update to the right of Assets/Depreciation.
Do you want to go directly to your asset summary?, click Yes and Continue
Click Edit to the right of each asset to be disposed
Go through several screens until you get to Tell Us More About This Rental Asset
Click on This item was sold……. And continue to answer the questions

You might also review information here.

Please update here if you have more questions or you can provide greater detail about your rental house.

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mcmcfaulC08Author

Thank you so much for your reply. The rental house is definitely been in my turbo tax for years. It is not fully depreciated since i owned it for the last 10 years only.

Now an additional question, when you say take the total of each asset, do you mean for each item in the rental house that i upgraded over the last few years, but never took any deprecation? for example, paying $14,000 for new siding. Is that something I should add into TurboTax as a new asset, and then state that it sold the same day as the house? You are so helpful, thanks much.

Vanessa A

Yes and no. If you paid $14,000 siding that should have been depreciated, the IRS doesn't really care if you took it or not. With depreciation, they consider it taken when it is allowed. So, if you could have taken $5,000 in depreciation, then you still must recapture the $5,000 you did not take.

So, yes, you will include the asset separately and mark it as sold the same day as the house.

However, you will still need to act as though you did take the depreciation even though you did not.

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Carl11_2

Employee

If the house was classified as a rental and you still report rental income/expenses in the year of the sale, you report the sale in the SCH E section of the program.

If the house "was" a rental or other business use in years past, but has since been converted to personal use in a prior year, that means you do "NOT" report anything concerning the property on SCH E in the tax year of the sale. There's nothing there. Then, you have to report the sale in the "Sale of Business Property" section. If the property was your primary residence in the year of the sale, you'd report it in the "Sale of Home (Gain or Loss)" section.

Assuming the property was not reported at all on SCH E in the tax year of the sale, you'll get your cost basis from the "last" tax return where you converted the property to personal use. There are two form 4562's that both print in landscape format. One is titled "Depreciation and Amortization Report" and the other is "Alternative Minimum Tax Depreciation". You'll most likely only need the first one. That will show your cost basis as well as all depreciation taken on the property and it's assets, up to the date you converted it to personal use.