Are you considering selling your rental property? What do you need to know about reporting the sale? What do you need to consider in terms of the IRS? First off, you have to report the transaction to the IRS. This is very important to do correctly as the last thing you want is to have errors and pay penalties.
It would be wise to consult with an experience tax professional to help guide you through this process. Below are a few things to look for when preparing to report the sale of your rental property. These are just guidelines as individually it will vary from person to person.
Is there a capital gain or loss?
It is important to determine if you have made a profit or loss on the sale of your rental property. This will establish whether you have a capital gain or a loss. As you continue the process of filing your taxes, knowing whether you have a capital gain or loss will help you make the right decision. You could be facing a huge tax burden.
The IRS will want to know which accounting method was used to come up with the numbers you are submitting. The two choices are the cash method or the accrual method. With the cash method income is reported when the cash is actually collected, while the accrual method shows the money earned but it has not actually been collected yet. Be sure to double check your records and work with a professional. A professional will help you determine the best method for your situation.
If there is rental income involved, it will be easier to divide the rental income into categories. This can be things such as the actual rental income, fees, advanced payments, and even early termination of lease fees. It is best to have a professional do this for you.
For some rental property owners, there will be depreciation calculated on the property. You will want to make sure this is done accurately. Depending on how the numbers look you might be able to use depreciation to help lower your overall tax bill. Consult a professional and have them do this for you.
If you are looking to sell your property quick and easily contact us today!
Give us a call at 240-801-6055 or visit http://landlordsellers.appreciatedpropertysolutions.com