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Updated about 12 years ago,
Taxes on sale of rental property
I think I'll probably have to hire a CPA this year but I'm curious of getting an idea where I stand. In 2008 my (now) ex-wife and I moved out of state and converted our personal home into a rental. Since we've not lived there 3 of the past 5 years, we will be required to pay taxes on this. I tried starting things up in Turbo tax and the numbers it spits out make absolutely no sense...
Our basis for depreciation for the past 4 years has been $137,600. We sold it for $145,000. The depreciation we have to add back in and the sales commissions we paid basically cancel each other out, leaving us a small profit on the sale to pay taxes on. Now it gets somewhat complicated.
The previous tenants were kicked out November 2011 and they really trashed the place. Because of the extent of damage and our distance, it took some time for us to get back there. We worked throughout January and February 2012 on doing repairs (it took a while because I still had to work full time while there and was doing all the work myself to avoid extra costs). During this time we were not advertising the property to rent because it was not ready, however we were asking around to family and friends if they had anyone interested in renting it. By february we decided the market looked reasonable and we would try to sell it, but during this time we also continued to casually try and see if we could find a trustworthy friend of a friend to rent it short term. We finally sold the property in May of 2011.
Sorry this is complicated... My specific questions about this situation are:
- Can we deduct repairs made before selling it, even though we ended up not renting it out again?
- Up to which point (deciding to sell, vs finally selling) can we deduct expenses as a rental property (utilities, taxes, etc), if at all
- There were improvements made before that we did not include in our original basis, and improvements we made after deciding to try and sell it. Will it look suspicious if we change the basis this year for the sale compared to the basis we have used to calculate depreiciation for the past 4 years? Realistically at the time of sale we had put about $30,000 into improvements (not repairs) when it was our personal property and we purchased the house for $126,500 so I'm not sure where a previous CPA came up with the $137,000 basis
- Lastly our settlement statement includes other fees beyond commissions such as title insurance, title search and 2nd half taxes. Are these items deducted from the basis as well?