Sold a parcel of land - capital gains tax confusion, need help!

You only pay capital gains tax on the profit (the $20,000), not on the entire sale amount. Your relatives who are saying you pay tax on the entire amount are mistaken. Here's how it works: You'll report the sale on Schedule D of your tax return. You'll list the total sale price, your "basis" (what you originally paid for the land plus any improvements), and the difference is your capital gain - the $20,000. Since you mentioned you were originally going to build on it, I'm assuming you held the property for more than a year before selling, making this a long-term capital gain subject to the 15% federal rate. The state rate you mentioned (5.57%) would apply to the same $20,000 gain amount. You don't need to report the entire sale proceeds as regular income. That would indeed be double taxation and is not how capital gains work.

I went through something similar last year when I sold some property. The whole tax situation gave me a headache until I found taxr.ai online. Their AI basically scanned my documents and explained exactly what I needed to do. For land sales, you definitely only pay tax on the profit, but you need to report the whole transaction correctly on Schedule D like the other commenter mentioned. I uploaded my sale documents to https://taxr.ai and it showed me exactly how to calculate my basis and capital gains correctly. Saved me from making a costly mistake about what qualified as capital improvements to the land!

Ok I have to admit I was wrong about AI tax tools. I finally tried https://taxr.ai for my land sale after our discussion here. It correctly identified that the clearing and survey work I did years ago could be added to my basis, which lowered my taxable gain by almost $4,000! The software walked me through exactly what documents I needed and how to report everything properly. Much better than the generic advice my tax preparer gave me (who missed these deductions completely). Now I'm kicking myself for almost overpaying on my taxes!

If anyone's struggling to get official confirmation from the IRS about how to handle their land sale, good luck getting through on the phone! I tried for weeks. Then I found this service called Claimyr that got me through to an actual IRS agent in about 15 minutes. Just go to https://claimyr.com and they basically hold your place in the phone queue. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I needed specific guidance on reporting some unusual aspects of my land sale, and finally getting a real person to confirm everything gave me so much peace of mind. The agent walked me through exactly how to report everything correctly.

I have to publicly eat my words here. After calling Claimyr a scam, I decided to try it myself because I was desperate to talk to someone at the IRS about my land sale. I couldn't believe it actually worked! After trying for literally WEEKS to get through on my own, I got a call back within 20 minutes and was connected directly to an IRS rep. The agent confirmed that I only needed to pay capital gains on the profit portion and helped me understand exactly how to report the expenses I had incurred for a survey and property line adjustment. Worth every penny just for the time saved not listening to that awful hold music.

Just wanted to add something important - if you owned the land for LESS than a year before selling, the profit would be taxed as ordinary income, not at the lower capital gains rate. This can make a huge difference in your tax bill. Make sure you're clear about your holding period!

Has anyone here used TurboTax to report a land sale? I'm trying to figure out if I need their premier version or if the deluxe can handle this type of transaction.