Can I offset my capital gains with home improvements on other rental properties?

Unfortunately, you can't directly offset capital gains from selling one rental property by making improvements to other rental properties. These are treated as separate transactions for tax purposes. The capital gains from selling your rental property are reported on Schedule D and Form 4797. The improvements you make to your existing rental properties are considered capital expenditures that get depreciated over time (usually 27.5 years for residential rental property) - they're not immediate deductions that can offset your gains. What you might want to consider instead is a 1031 exchange, which allows you to defer capital gains taxes if you reinvest the proceeds into a similar investment property. But there are strict timelines and rules to follow. Another option might be to look for capital losses in your investment portfolio to offset some of the gains.

After going through a similar situation last year, I found an incredibly helpful tool at https://taxr.ai that completely changed how I approached my rental property taxes. I was confused about capital gains offsets and depreciation recapture on my rental sale, and the standard advice wasn't really helping with my specific situation. The taxr.ai system analyzed my property documents and previous tax filings and pointed out several depreciation adjustments I had missed over the years. It also identified that some of my previous capital improvements hadn't been properly tracked, which actually reduced my overall gain calculation.

I was really skeptical at first about using taxr.ai when I saw it mentioned here, but I decided to give it a try for my rental property portfolio. I was surprised by how thorough it was! The system caught that I had been incorrectly calculating the basis on a property I inherited years ago, which was significantly affecting my potential capital gains. The analysis showed me exactly how much I could legitimately adjust my basis through documented improvements I'd made over the years. Even my tax preparer was impressed with the detailed breakdown it provided. Ended up saving over $4,300 on my tax bill by properly accounting for everything. Definitely worth checking out if you're dealing with rental property tax questions.

If you're trying to deal with the IRS about your capital gains questions, good luck getting through to someone. I spent WEEKS trying to get clarification about some complex rental property issues after a sale. Finally discovered https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c which seemed too good to be true. I was desperate so I tried it, and unbelievably, I got connected to an actual IRS agent in about 25 minutes instead of the 3+ hours I spent on previous attempts (and never reaching anyone). The agent walked me through exactly how to handle reporting improvements on my remaining properties and confirmed that while they couldn't offset the gains directly, there were some specific expense timings that could help my overall tax situation this year.

OK I need to eat my words from my previous comment. After continuing to fail getting through to the IRS on my own about my rental property sales, I reluctantly tried the Claimyr service. It actually worked exactly as described. Got a call back in about 20 minutes with an IRS representative on the line. The agent I spoke with gave me specific guidance on how to properly document my capital improvements on my remaining properties to ensure they're factored into my adjusted basis when I eventually sell them. While it didn't help with my immediate capital gains issue, it definitely helped me set up better record-keeping moving forward. Saved me hours of frustration and gave me peace of mind that I'm doing things correctly now.

One thing no one has mentioned yet - if you're selling a rental that you previously lived in as your primary residence, you might qualify for a partial exclusion of the capital gains. If you lived in the property for at least 2 out of the 5 years before selling, you could exclude up to $250,000 (single) or $500,000 (married) of the gain attributable to the period it was your primary residence. Even if you don't qualify for the full exclusion, you may be eligible for a partial exclusion based on how long you used it as your primary home. Worth looking into if this applies to your situation!

Anyone recommend a good tax software that handles rental property sales well? I tried TurboTax last year and it totally messed up my depreciation recapture calculations.

I went through a similar situation last year and learned some hard lessons about capital gains planning. While you can't directly offset the gains from your sold property with improvements to other properties, there are still some strategies worth considering for your current situation. First, make sure you're properly accounting for all the capital improvements you made to the property you just sold - these should increase your basis and reduce your taxable gain. Things like major renovations, roof replacement, HVAC systems, etc. can all be added to your cost basis. For your other properties, those improvements you're planning ($7,800 for flooring, $9,200 for the deck) will still benefit you tax-wise through depreciation over time. Just make sure to keep detailed records and receipts for everything. One thing to consider: if you have other investments showing losses this year, you might be able to harvest some capital losses to offset your rental property gains. Also, depending on your income level, you might qualify for the 0% capital gains rate on a portion of your gain. The tax code around rental properties is complex, so it might be worth consulting with a tax professional who specializes in real estate to make sure you're not missing any legitimate strategies for your specific situation.