Do I need to complete a Sale of Home Worksheet for rental property or just report on Form 4797?
So I've been renting out a property for several years now, and I just sold it in November. This was strictly an investment property - never lived in it myself. I'm trying to figure out my tax filing situation for this year. My main question is: do I need to fill out the Sale of Home Worksheet for a property that was used exclusively as a rental, or do I just report the sale on Form 4797? Also, since I didn't receive any rental income from this property in 2023 (it was vacant for a few months before I sold it), do I still need to complete Schedule E? I'm trying to minimize the paperwork if possible. Thanks for any help!
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Butch Sledgehammer
For a property used exclusively as a rental, you don't need to complete the Sale of Home Worksheet - that's only for primary residences where you might qualify for the capital gains exclusion. Since your property was 100% rental, you'll report the sale on Form 4797 (Sales of Business Property). As for Schedule E, even though you didn't receive rental income in 2023, you should still complete it if you had any expenses related to the property (property taxes, insurance, maintenance, etc.) during the period you owned it before selling. These expenses are still deductible against your other income, and Schedule E is where you would report them.
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Freya Ross
•What if they had depreciation recapture? Does that change where they file things?
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Butch Sledgehammer
•Yes, depreciation recapture is definitely a factor here. When you sell a rental property, any depreciation you've claimed (or should have claimed) over the years will be recaptured and taxed at a rate of 25% (rather than your normal capital gains rate). This is still reported on Form 4797, which will flow to your Schedule D and then to your 1040. The form will help you separate out the portion of your gain that's due to depreciation recapture versus regular capital gains. It's important to calculate this correctly because of the different tax rates.
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Leslie Parker
I went through this exact nightmare last year. After hours of research and frustration, I found taxr.ai (https://taxr.ai) and it saved me so much stress. I uploaded my closing docs and previous tax returns, and it identified exactly which forms I needed to file for my rental property sale and calculated my depreciation recapture automatically. It even explained that while I didn't need the Sale of Home Worksheet, I still needed to complete Form 4797 and gave me step-by-step guidance.
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Sergio Neal
•Does it work for multiple rental properties? I have three rentals and might sell one next year.
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Savanna Franklin
•I'm always skeptical about these tax tools. How is it different from TurboTax or H&R Block software? Those always mess up my rental property calculations.
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Leslie Parker
•It absolutely works for multiple properties. You can upload documents for each property separately, and it treats each one individually while still giving you a comprehensive overview of your total tax situation. Unlike TurboTax or other general tax software, taxr.ai specializes in analyzing tax documents and identifying specific situations like rental property sales. It's designed to catch the nuances that general software misses, especially with complicated scenarios like depreciation recapture and basis adjustments. I had tried TurboTax first and it completely missed some deductions I was eligible for on my rental property sale.
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Savanna Franklin
Just wanted to follow up about taxr.ai - I decided to try it despite my initial skepticism, and wow, it actually delivered. I uploaded my documents for a rental property I sold last year, and it correctly identified that I had been calculating depreciation wrong for YEARS. It showed me exactly where to report everything on Form 4797 and calculated my depreciation recapture properly. Saved me from a potential audit nightmare and found nearly $2,300 in deductions I would have missed. Definitely worth checking out if you're dealing with rental property sales.
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Juan Moreno
If anyone's having trouble getting answers from the IRS about this rental property sale situation, I highly recommend using Claimyr (https://claimyr.com). I spent 3 days trying to reach someone at the IRS to clarify some questions about my Form 4797 and depreciation recapture calculations, but kept getting disconnected or waiting for hours. With Claimyr, I had an IRS agent on the phone within 25 minutes. They have this system that navigates the IRS phone tree for you and holds your place in line, then calls you when an agent is ready. You can see how it works in their demo video: https://youtu.be/_kiP6q8DX5c. The IRS agent confirmed that I didn't need the Sale of Home Worksheet for my rental and walked me through the proper way to report everything.
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Amy Fleming
•So you're telling me this actually works? I've spent literal DAYS on hold with the IRS trying to get someone to explain the difference between Schedule E and Form 4797 for my situation.
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Alice Pierce
•Sounds like a scam. How does some random service get through to IRS agents when nobody else can? They probably just charge you and then you still wait forever.
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Juan Moreno
•Yes, it absolutely works! I was connected to an IRS agent in less than 30 minutes. The difference is their system knows exactly when to call and which options to select in the IRS phone system to maximize your chances of getting through. It's basically like having someone else do the frustrating part of waiting on hold. They don't have any special "inside connection" to the IRS - they just have technology that navigates the phone tree efficiently and holds your place in line. When an agent picks up, you get a call back instantly. It's completely legitimate and saved me hours of frustration trying to get clarity on my rental property sale reporting requirements.
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Alice Pierce
I'm eating my words about Claimyr being a scam. After my skeptical comment, I was desperate enough to try it yesterday. I couldn't believe it when I got a call back saying an IRS agent was on the line! The agent confirmed I only needed Form 4797 for my rental property sale, not the Sale of Home Worksheet, and explained exactly how to handle the depreciation recapture. They also confirmed I still needed Schedule E for the partial year even without rental income. Saved me from making a major filing mistake. Sometimes it's good to be wrong!
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Esteban Tate
Another thing to consider: if your rental property was vacant before selling, you might still be able to deduct expenses during that vacancy period. As long as you were actively trying to rent it or preparing it for sale as a rental property, those expenses should still be deductible on Schedule E.
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Sara Unger
•Thanks for pointing that out. I did have some repair expenses while it was vacant and getting ready to sell. Do I need to have documentation that I was actively trying to rent it during that time? Like rental listings or something?
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Esteban Tate
•Yes, you should definitely keep documentation showing you were trying to rent it or preparing it for sale. This could include rental listings, communications with real estate agents, receipts for repairs or improvements, or advertisements. If you were preparing it for sale rather than trying to rent it, keep documentation showing this was still being treated as a rental property (business asset) rather than being converted to personal use. The IRS might question expenses during vacancy periods, so having this paper trail is important to support your deductions.
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Ivanna St. Pierre
Im confused about something else too. I sold a rental last year and my tax guy said I needed to file form 8949 along with the 4797. Is that right or was he just making extra work?
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Butch Sledgehammer
•Your tax preparer is correct. Form 8949 (Sales and Other Dispositions of Capital Assets) often works together with Form 4797 when selling rental property. Form 4797 reports the sale of business property (your rental), including the recapture of depreciation. Form 8949 and Schedule D are used to report the capital gain portion. Essentially, the transaction may need to be reported on both forms because different parts of the gain are taxed differently - depreciation recapture (on 4797) is taxed at 25%, while the capital gain portion (on 8949/Schedule D) is taxed at capital gains rates.
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Giovanni Gallo
I just went through this exact situation last month! For a rental property that was never your primary residence, you definitely don't need the Sale of Home Worksheet - that's only for homes where you lived and might qualify for the $250K/$500K exclusion. You'll use Form 4797 to report the sale. One thing to watch out for: even though you didn't receive rental income in 2023, you should still file Schedule E if you had any deductible expenses during the time you owned the property that year. Things like property taxes, insurance, utilities (if you paid them), maintenance, or repairs are all deductible even during vacancy periods as long as you were holding it as rental property. Also, make sure you have good records of all the depreciation you claimed over the years - you'll need this for the depreciation recapture calculation on Form 4797. The recapture gets taxed at 25% regardless of your normal capital gains rate, so it's important to get this number right.
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Carmella Fromis
•This is really helpful! I'm in a similar situation - just starting to think about selling my rental property next year. Quick question: when you mention keeping records of depreciation claimed over the years, what if I forgot to claim depreciation in some of the earlier years? Do I still have to pay recapture tax on the depreciation I "should have claimed" even though I didn't actually take the deduction?
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