Sale of Rental

Today, Michael from Palm Bay, FL tells us “I bought a home in 1984 as my residence. I was transferred in 1991 and had to rent it due to there being no market for home sales. It was rented (rental property schedule E) until 2004, when I retired and sold it.

Do I declare the profit on the sale on Schedule D or on Form 4797? I have done both with Turbo Tax. Schedule D seems complicated, and Form 4797 seems too simple.


Hi Michael,

True. It’s totally confusing to the uninitiated. But you’re right, sales of rental properties go on Form 4797. The profits – at least the profits that come from depreciation, will be taxed, essentially, at the 25% rate – or your highest tax rate, whichever is lower.

And you think it seems simple? How interesting.

Many of us struggle with the subtleties behind that form. ;~)

Please be sure you take into account all depreciation.

Remember to include in the cost, all the costs of the purchase (your original escrow statement- dig it out and be sure to look for all the closing costs), any refinancing over the years, the costs of your sale (your current escrow statement) that weren’t deductible on your Schedule A as interest or property taxes. Remember to include any rents or security deposits transferred in escrow.

Remember to include all improvements you made while it was still your personal residence. (Unless they’ve already been fully depreciated.)

Looks like you’ve got the hang of it!

You’ll find links to all kinds of rental, sales and tax information at TaxMama.com

File Download (2:05 min / 0.5 MB)

Leave a Reply