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April 11, 2023
Question

Trying to input sold rental property, calculation looks incorrect

  • April 11, 2023
  • 1 reply
  • 0 views

Why when I input the sale price of the property, it does not deduct the base price originally paid? It calculates tax on the total selling price of the house instead of the difference. 

 

Also, before selling the house, we made a lot of improvements to the house. Nowhere do we see any sections that allow us to enter expenses incurred, such as pouring a new patio, redoing the roof, etc.

 

Where should we be finding these fields in the program? Any and all efforts would be very much appreciated!

1 reply

KrisD15
April 11, 2023

When you sell a rental, there is usually two types of income

Depreciation Recapture

Capital Gains

 

Your original cost is lowered by the depreciation on the building, this is your adjusted basis.

The amount of depreciation you need to "pay back" is Ordinary Income. 

If you sold more than you paid, this is Capital Gains. 

 

Any improvements made should have been added as an asset the year they were added to the rental. 

 

When you make improvements or add assets, such as appliances, they are each listed separately with their own depreciation schedule. 

 

When you sell, you must allocate part of the sale proceeds to 

The Land (that is NOT ever depreciated, so any increase is Capital Gains) 

The assets, such as the roof. Usually allocating the remaining value of that asset is easiest since there is then no depreciation recapture. 

Whatever sale proceeds you have left goes against the building. 

 

Depreciation is not an option. Whether you properly claimed the depreciation or not, it must be "recaptured" 

 

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