To report the sale of rental property, you need to fill out the following forms:
- Form 4797, Sales of Business Property: This form is used to report the sale or exchange of real property used in your trade or business. If the rental property is considered part of your trade or business, you will report the gain or loss from the sale on this form.
- Form 8949, Sales and Other Dispositions of Capital Assets: If the rental property is not part of a trade or business but is held for investment, you will report the sale on this form. Form 8949 is used to report the sale or exchange of capital assets, including gains from involuntary conversions of capital assets not used in your trade or business.
- Schedule D (Form 1040), Capital Gains and Losses: This schedule is used to figure the overall gain or loss from transactions reported on Form 8949 and to report transactions you don’t have to report on Form 8949. It is also used to report gains from Form 4797.
Additionally, if the sale is reported on an installment method, you will need:
- Form 6252, Installment Sale Income: This form is used if you sold the property at a gain and will receive a payment in a tax year after the year of sale. You generally report the sale on the installment method unless you elect not to do so.
For more detailed information on how to report the sale, you can refer to Publication 544, Sales and Other Dispositions of Assets, which explains the tax rules that apply when you dispose of property, including how to figure gain or loss, whether it is ordinary or capital, and how to report the transaction on your tax return.
Sources:
Instructions for Form 4797 (2023)
Instructions for Schedule D (Form 1041) (2023)
Publication 527 (2023)
Instructions for Form 8949 (2023)
Publication 544 (2023)
