Search Help Topics:

**The information below has not been verified for the 2020 tax year as the IRS Pub. 334 has not yet been released by the IRS.**

The buying and selling of property may be considered self-employment/business income or investment income if it does not fit under the category of rental income. Ultimately, the taxpayer must determine the true nature of his or her operations and how it should be classified:

Note. The IRS is looking closer to determine in each situation whether buying and selling properties is "real estate investing" or actually a "trade or business." There are no exact guidelines for this determination; however, the IRS looks at the facts and circumstances of each case individually.

Rental Income:

In most cases, you must include in your gross income all amounts you receive as rent. Rental income is any payment you receive for the use or occupation of property.

To enter or review information for Schedule E into the TaxAct program:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Rent or Royalty Income in the Federal Quick Q&A Topics menu to expand, then click Real estate rental income.
  3. Click + Add Schedule E, Pg 1 to create a new copy of the form or click Edit to review a form already created.
  4. Continue with the interview process to enter all of the appropriate information.

Self Employment/Business Income:

If you are in the business of selling property (a real estate dealer), you would report that business on Federal Schedule C.

Per IRS Publication 334 Tax Guide for Small Business (For Individuals Who Use Schedule C), on page 21:

Real Estate Rents

If you are a real estate dealer who receives income from renting real property or an owner of a hotel, motel, etc., who provides services (maid services, etc.) for guests, report the rental income and expenses on Schedule C. If you are not a real estate dealer or the kind of owner described in the preceding sentence, report the rental income and expenses on Schedule E. For more information, see Pub. 527, Residential Rental Property (Including Rental of Vacation Homes).

Real estate dealer. You are a real estate dealer if you are engaged in the business of selling real estate to customers with the purpose of making a profit from those sales. Rent you receive from real estate held for sale to customers is subject to SE tax. However, rent you receive from real estate held for speculation or investment is not subject to SE tax.

To enter or review information for Schedule C into the TaxAct program:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Business Income in the Federal Quick Q&A Topics menu to expand, then click Business income or loss from a sole proprietorship.
  3. Click + Add Schedule C to create a new copy of the form or click Edit to review a form already created.
  4. Continue with the interview process to enter all of the appropriate information.

Investment Income:

If you determine this sale would be considered property held as an investment, rather than in the business of "flipping" houses, then the sale would be reported on Schedule D as a capital gain or loss.

Fix up costs, expenses of sale and commissions would be added to your original cost/basis to arrive at the amount to enter for Cost or other basis. The program does not ask for these items separately. You will want to keep detailed records to support this entry.

To enter or review information for Form 1099-B into the TaxAct program:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Investment Income in the Federal Quick Q&A Topics menu to expand, click Gain or loss on the sale of investments to expand, then click Capital gain or loss (Form 1099-B).
  3. Click + Add Form 1099-B to create a new copy of the form or click Edit to review a form already created.
  4. Continue with the interview process to enter all of the appropriate information.

Investment interest expense deduction is claimed on Federal Form 4952 Investment Interest Expense Deduction and the allowable deduction will flow back to Schedule A (Form 1040) Itemized Deductions, Line 9 to be claimed as an itemized deduction, up to the amount of your investment income.

To enter the information for Form 4952 in the TaxAct program:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Itemized or Standard Deductions in the Federal Quick Q&A Topics menu to expand, then click Interest expenses.
  3. Continue with the interview process to enter all of the appropriate information.
  4. On the screen titled Enter the amount of investment interest you paid or accrued in 2020, complete the appropriate information for Form 4952, then click Continue.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.


Was this helpful to you?