Get your taxes done using TurboTax

This does require creativity when only a room is rented. After you indicate it was converted to personal use, do not adjust your cost basis for the sale of your home, use the full cost basis. Simply enter the full cost basis, and when asked enter the total of depreciation expense used on prior returns and, if applicable the current year.

When you enter the home sale in TurboTax it will ask for a couple of items that are needed to report the sale correctly.  

1. The total depreciation expense that was allowed during the period it was available for rent.  Check your prior tax returns for this figure.
2. The number of days the property was available for rent during the ownership period 
   1. Since the whole house wasn't rented you should further use the square feet of the space rented and divide it by the total square feet of your home. Multiply that result by the number of days rented. This is the number of days to enter to appropriately reflect the correct gain attributable to the rental portion of the house.

Results:

1. The amount of depreciation that was allowed will be completely taxable up to the amount of gain received on the sale.
2. The remaining gain if any, will be split between taxable and amount eligible for exclusion by using the following formula.
   • The total days available for rent (indicated above) will be divided by the total days owned to determine the portion of the remaining amount of gain that is taxable for the rental period
   • The balance will be eligible for the home sale exclusion
3. TurboTax will do all the calculations based on your entry

Please update here is you have more questions and we will help.

@klrgn