Under no circumstances and with no exceptions will you ever change the cost basis of an asset already listed in the assets/depreciation section. Doing so will totally mess up things for the depreciation on those assets.
I am assuming the last renter moved out of the property in 2020, then you did the remodel and sold the property all in 2020. I am also assuming that you do not qualify for the "lived in 2 of last 5 years" capital gains tax exception. Here's what I recommend you do to keep things simple and get the best tax advantage.
- First, do not enter any assets in the assets/depreciation section for those property improvements you did after the last renter moved out.
- Work through the SCH E section of the program and convert the property and all other listed assets if any, to personal use, with a conversion date of one day after the last renter moved out. This will stop depreciation on the property and all other assets listed in the assets/depreciation section on that conversion date. WHile working through each individual asset to convert them to personal use, take note of the prior year's depreciation and current year depreciation on each individual asset. Then add up those depreciation amounts to get the total amount of depreciation taken on the rental property and all of it's assets.
- Report this sale in the "Sale of Business Property" section of the program. When you get to the screen asking for your acquisition and sales information, it'a rather simple. Just enter the following information that it asks you for.
Description - It's best you enter the same description on the property that is already used for the property on the SCH E.
Date Acquired - The date you originally purchased, closed on, or acquired ownership of the property.
Date Sold - The date you closed on the sale of this property.
Cost of Property - Here you will enter the original purchase price you paid for the property, plus the cost of your remodel/property improvements, plus any sales expenses you paid when you sold the property. (this includes realtor commissions.)
Depreciation Taken on this Property - Here you will enter the total of all depreciation you have taken on the property. (You got this earlier as you were converting the property and all of it's assets to personal use.)
Then continue, and on the next screen select "Real Estate that I took depreciation on", and continue again.
You should be able to finish this section through on your own now.
