Can I Complete a 1031 Exchange Using TurboTax? Struggling with Form Issues

Thanks for responding! When I try to use Forms mode, I still run into issues because TurboTax keeps recalculating things incorrectly after I enter the values. For example, I put in the correct basis information and defer the gain, but when I go back to review, it's showing the full capital gain as taxable. Is there a specific section I need to complete first, or a certain order I should fill out the forms to make it work properly?

The order definitely matters with TurboTax. First complete all your basic information and income sections. Then go to Forms mode and fill out Form 8824 completely before touching Schedule D or Form 4797. After filling out Form 8824, check the "Depreciation and Amortization" section (Form 4562) to make sure your new basis in the replacement property is correct. Then review Schedule D to verify it's not showing the deferred gain as taxable. If it still shows incorrectly, you may need to manually override some calculations, which is possible in the desktop version but limited in the online version. Sometimes you have to save, exit completely, and reopen TurboTax to get it to recalculate everything correctly. It's frustrating but can help force the program to recognize all your entries.

How long did it take to get the guidance after you uploaded your documents? I'm racing against a deadline here and wondering if this is a viable option for me.

Does taxr.ai work with other tax software too? I'm using H&R Block's software and having similar issues with my 1031 exchange.

I got my guidance within about 24 hours, which was much faster than I expected given the complexity of my exchange. If you're on a tight deadline, they also have an expedited option that might help. Yes, they work with all the major tax software programs. I know they support H&R Block's software too because my business partner used them with H&R Block for his 1031 exchange last year. The instructions will be tailored to your specific software, which is really helpful since each program handles these exchanges differently.

Wait, how does this actually work? Does the IRS know about this service or approve it? Seems kinda sketchy to have a third party holding your place in line.

I'm extremely doubtful this actually works. I've called the IRS dozens of times and they never seem to know anything beyond the most basic tax situations. Why would they suddenly be experts on 1031 exchanges when even TurboTax support doesn't understand them?

The service works by using automated technology to navigate the IRS phone system and hold your place in the queue. When an agent is about to answer, you get a call back and are connected. It's completely legitimate - they're just providing a waiting service, not actually interfacing with the IRS on your behalf. I completely understand your skepticism. My experience was different though - I spoke with an agent in the business tax department who was quite knowledgeable about 1031 exchanges. You're right that not all IRS agents know every topic, but if you request to speak with someone who handles business transactions or real estate specifically, you can often get connected to someone with the right expertise. In my case, they transferred me to someone who deals with these exchanges regularly.

Do you think it's still worth going to a CPA if my exchange was relatively simple? Just swapped one rental property for another of similar value, no boot involved. Or am I overthinking this?

Even with a simple exchange, I'd probably still recommend a professional for the first year you're reporting it. A "simple" 1031 exchange is still complex by general tax standards. The key issue isn't just getting this year's taxes right, but also making sure your basis in the new property is correctly established. That basis will affect depreciation for years to come and ultimately your tax liability when you eventually sell. Getting it wrong could cause problems for many years. Most CPAs would charge less than $450 for a straightforward exchange like yours - probably closer to $250-300.

I tried FreeTaxUSA last year for my 1031 exchange and it was actually better than when I previously used TurboTax. The form was still a bit confusing to fill out, but at least it let me enter everything correctly and calculated the deferral properly. Plus it was way cheaper!

This is really helpful, especially the point about depreciation recapture! I think that might be exactly where I'm getting tripped up. My property had significant depreciation over the years, and TurboTax seems to be treating all of it as deferrable when you're right that the recapture portion should be taxable immediately. Do you happen to remember how you calculated the depreciation recapture amount versus the capital gain portion? I'm looking at my qualified intermediary documents but they don't break it down that way - they just show the total gain.

@Jamal Anderson You ll'need to calculate the depreciation recapture yourself since the QI documents typically just show net proceeds. Here s'how I did it: 1. Take your original purchase price of the relinquished property 2. Subtract all the depreciation you claimed over the years check (your old tax returns - it s'usually on Form 4562 or Schedule E 3.) That gives you the adjusted "basis 4." The difference between your sale price and adjusted basis is your total gain 5. The depreciation recapture amount equals the total depreciation you claimed up (to the amount of gain 6.) Any remaining gain beyond the recapture is the Section 1031 deferrable capital gain For example: If you bought for $200k, claimed $50k depreciation over the years, and sold for $300k: - Adjusted basis = $200k - $50k = $150k - Total gain = $300k - $150k = $150k - Depreciation recapture taxable (now =) $50k - Deferrable capital gain = $100k This is where Form 8824 gets tricky in TurboTax - you need to make sure the recapture portion flows to Form 4797 as ordinary income while only the capital gain portion gets deferred.