How to Complete IRS Form 4797 For the Sale of Real Estate
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- Опубліковано 14 жов 2024
- For a 2023 update: • IRS Form 4797: Rental ...
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If you are engaged in the rental real estate business, you might one day decide to sell that rental property. The sale of rental real estate carries special rules and provisions that often differ from the sale of other property.
The sale of real estate (Section 1250 property) that is used in a trade or business and held for more than one year can qualify for certain preferential tax treatment under Section 1231. Gains are treated as long-term capital gains, while losses are treated as ordinary losses. Although the Section 1231 gains are characterized as long-term capital gains, consideration must also be given to unrecaptured Section 1250 depreciation.
In this video, I cover three examples of how to report the sale of residential real estate on IRS Form 4797.
1. The sale of property held long-term for a gain
2. The sale of property held long-term for a loss
3. The sale of property held short-term for a gain
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DISCLAIMER: The information provided in this video may contain information about tax, financial, and legal topics. Such materials are for informational purposes only and may not reflect the most current developments. These informational materials are not intended and should not be taken as tax, financial, or legal advice. You should contact an advisor to discuss your specific facts and circumstances. Self-help services may not be permitted in all states or jurisdictions. The use of these materials does not create an attorney-client or confidential relationship. This video does not include information about every topic or issue related to these informational materials.
#Form4797 #Section1231 #realestatetaxes #realestateinvesting
For a 2023 update: ua-cam.com/video/XbooTlHxZoM/v-deo.html
does IRS automatically audit you income tax after you sell your Rental property to see if you claim for rental income? if yes how many year prior to the date you sell? thanks
The best 23min I have ever spent looking into section 1250 property.
Glad it was helpful. Thank you for the support!
wicked man....thanks for the info. Sold a rental us property as a canadian in 2023 that i held for more than a decade, so this video is super relevant to me
Thanks! Glad to hear it was helpful.
Here is the 5 steps I came up with. Let me know if I missed any. Perhaps can help others as well.
1) FORM 4797 (for gain)
2) SECTION 1250 WORKSHEET (for recapture calculation)
3) SCHEDULE D (put gain and recapture on)
4) SCHEDULE D WORKSHEET (to calculate tax)
5) 1040nr
@@JasonDKnott
That’s very informative! Thank you. Do you have any videos that explain the property's combined use of personal property and rental property, which will be sold at the end of the long-term holding period to use section 121 & non-qualified use?
Thank you so much for this! I was looking for where to add my recaptured depreciation on my return for weeks and this really helped explain it!
You're welcome!
Hello JASON; your tutorial has clear explanation very precise and very concise, Thanks.
Glad it was helpful!
Hello, great video, easy to follow! Question: Does the land should be allocated in Part 1? I believe the IRS request to break down the land and the building but I don't see that point of doing it, what's your opinion?
Wonderful!! LOVED the fact that you had the forms showing your examples and explanations
Jason: Thank you for this. Very well done and useful. So if I understand correctly, under your first fact pattern where the real estate was held for more than one year with a gain when sold, the total gain of $65,782 would be taxed entirely at the individual's capital gains tax rate. Some other videos I have seen seem to say that $48,000 of the gain would be taxed at the individual's capital gains tax rate and the remaining $17,728, representing the recaptured depreciation, would be taxed at up to 25 percent per the Schedule D tax worksheet. I'm confused. Can you shed any light on this? Thanks.
I have the same question
Thanks for doing all your videos. They are very informative and of great help to me.
This is very clear instruction, very helpful.
How do I report a rental property capital gain for a given up property through a 1031 exchange?
Same way as your presentation?
love your video, they are clear and understandable. please make more videos like this. Thank you!
Thank you! Glad to hear the video was helpful
This helped us 100%. Thank you.
Hi Jason, can you please teach how and where to record the increase of basis? If a person remodeled a rental home, but not selling yet, how do I increase the basis and take the higher depreciation? Or depreciate it as different asset? I am confused increased basis with financial accounting. Thank you!
Thank you for a very clear and concise flow of sale to different forms. Please can you do same for Sch D and Form 8949 . I saw your video for QOZ but a general one what all goes to give the capital gain figure on Form 1040
Excellent Excellent Excellent Video. I have been on UA-cam since the beginning, first ever comment.
Jason, the video was very helpful. In the sale of the rental property, I see that the land and building are all included in Part III. I had also read that the Land or 1231 portion should be done on Part I, and the rental building portion 1250 is done on Part III. Is it okay to use either format? Also do you have any video that would show how to allocate appliances 1245 property that have not been fully depreciated at the time of sale to Form 4797.
Good question! Yes, you can separately state each of the asset items if you want to be more precise in allocating the sales proceeds to each asset based on their relative FMV. We have a video that covers this scenario as well: ua-cam.com/video/XbooTlHxZoM/v-deo.html
Thx for the vid! I'm a U.S. citizen who bought a new construction condo in Kyiv Ukraine. Turns out the land owner obtained it from the city of Kyiv in 2006, and its not zoned for residential. And due to bribes, the project completed. The city of Kyiv reposessed the land now and we lost our units. I've never lived in the unit. No one has
Should I report this loss on 4797? Schedule D?
Very Helpful video, many thanks. RElated to "cost orother basis, plus improvements and expense of sales, column f, form 4797. Say I owned the property for 18 years, do I include the improvements I made in all the years of ownership?
Thanks, you made it understandable. I may give it a go, as opposed to an accountant
Thanks for the support. Glad to hear it was helpful!
I liked your video ... have a question ... on another website, that person for a rental sale noted adding in a 25% tax for depreciation capture as ordinary income along with a 15% long-term capital gain tax, e.g., for $100K capital gain with $40K depreciation capture, taxes due would be 15% times $60K and 25% times $40K. Is your example complete here? Just record the capital gain on Form 4797 along with Schedule D and no need to deal with depreciation capture as ordinary income and taxes due. Please clarify. Thanks.
hi Jason, thanks for your wonderful explanation! can you illustrate that how to report the sale of home that was converted from primary residence (first 3 years) into rental house (the last 2 years) on the form 4797?
Yes I wanted to know this as well. Many people get started in rental property business by renting a home that was once their own residence.
Just watched your video on filling out form 4797 for a sale of rental property. Seems pretty easy. But you don’t mention unrecapture 1250 gain being taxed separately. Do you have another video that deals with that verses long term capital gain?
Yes! In the video description we have links to other videos that cover Section 1250 & 1231 gains and losses, including the various recapture issues.
In your summary, you mentioned covering Parts I & III for Form 4797, as I recall. Does that mean there's no need to address depreciation capture in Part II of the Form? Does that mean that a complete tax return to cover the rental property sale only requires Schedule E (rent income received), Schedule D to cover the rental sale long-term capital gain and Form 4797 Parts I & III? If so, I guess that means for the rental property sale that the 25% tax for depreciation capture and the long-term capital gain tax (15 or 20%) are both covered when completing the Schedule D Worksheet, is that right? Then there's no need for the rental property sale to include Part II on Form 4797 and no need to include 1040 Schedule 1 Line 4, correct?
Super helpful as usual!
Glad it was helpful!
Very great video & very effective, thank you
You're welcome!
Thanks for showing where to enter depreciation. Very nice . Could you please tell on rental real estate property ( house) converted to personal use, do you pay recapture tax in the year of conversation or when you sell personal home . Is conversion regarded sale of home then pay tax the year of conversion or pay tax when sell of personal home in future and not conversion time . Thanks
Is 8949 needed with basis? Thank you!
How about the rental depreciation recap issue ?
Good question! The video description includes links to other videos where we cover Section 1250 depreciation recapture and Section 1231 gains and losses.
If Schedule K-1 is received, the sale of rental property will each partner need to complete Form 4797 for the sale instead of Schedule D to recognize the gain?
Can you show an example of selling a car in the same year that you bought for business purposes.
Thank you soooo much! What if a couple rented their rental home for more than two years, now they want to use 1031, does it consider sales and need to file 4797? TIA!
Sir thanks for another wonderful video.
My pleasure!
i sold a rental property sept of 2024 where i estimate i will pay like $70K. when i do my filing on April 2025, will i be charged with penalty for not paying the taxes out right when i received the proceeds of the sale on sept of 2024. if i will be penalized i want to pay now so i can avoid the penalty. i would appreciate anyone's comment.
This video is very helpful. 🎉
Is the Depreciation + gain taxed as a Capital Gain? I though that the Deprecition Recapture was taxed at either regular income tax rate or 25% and a seperate Capital Gain on Schedule D.
Could you please make a video about 1031 exchange?
Yes! We will add them to the list
15:13 My husband and myself are new home builders and we are trying to do our business taxes. I’m filling out form 4797. I wanted to know if this the correct form for my situation. We bought land in 2022 built a house on it then sold it in the same year. It was never rental property. We owned it for less then one year. So would we report the sell on form 4797?We bought and sold property in our business name.
Very helpful
If an HOA has not filed for 13 years and all income and expenses are exempt should the HOA file 1120-H for all years or just start filing for the current year?
If your rental property is sold for land value only - mine were immediately demolished - does that change anything? Thank you
Do you do these forms yourself for clients in tax returns if so let me know your cost ?