How do I separate the rental percentage for 4 months, and the full (100%) rental spare for the additional 8 months? Would I need to enter or show two separate rental incomes?
I am assuming 4 months *exactly* with the dates I"m using. You can adjust as necessary. Basically, you will convert "everything" to personal use with a conversion date of Apr 30, 2020. Then you will enter an entirely new rental property that is 100% business use with an in service date of May 1, 2020.
So work through the existing rental and about 3-4 screens in select the option for "I converted this property from a rental to personal use" Select anything else on that screen that applies too. Then continue working through the rental income and expenses section "as if" nothing has changed. You will enter the rental income received only up to the date you converted it to personal use, and only the rental expenses incurred up to the date you converted it to personal use.
Next, work through the assets/depreciation section. You must work through each individually listed asst one at a time and perform the following.
- On the first screen write down the cost basis along with the total amount of prior year's depreciation taken on that asset.
- On the screen that asks if you stopped using this asset in 2020, answer YES.
- On the screen that asks "Special Handling Required?" click YES. (If you click NO you will be *forced* to enter sales information. You did not sell this property. So click YES.)
- On the final screen write down the 4 months of depreciation that is being taken for 2020. Add this 2020 depreciation to the prior year's depreciation taken on this asset and write down the total. You *will* need this number, along with the cost of the asset.
Note that you must do the above for each individual asset listed in the assets/depreciation section.
Once you've finished the assets/depreciation section continue working it through until you have completed that specific rental property and you're on the "Rental & Royalty Summary" screen.
Now click the button for "Add Another Rental or Royalty" and start working it through. Take note of the following:
- Your "in service" or "conversion date" will be one day after you converted things to personal use. So in my example your date of converting it back to a rental has to be May 1, 2020 or after.
- You will only report rental income received after you converted it back to a rental.
- You will only claim expenses incurred after you converted it back to a rental.
- As you enter the assets anew (with 100% business use this time) you must reduce the cost basis on each asset by the depreciation already taken on that asset in the past. For the property itself you'll have two boxes to deal with. One call COST and the other COST OF LAND. The amount in the COST box must be reduced by the amount of depreciation taken on the property already. The amount in the COST OF LAND box does not get reduced.
For this "new" rental property, depreciation starts over from year one with the structure being depreciated over the next 27.5 years based on the adjusted cost basis (adjusted to account for the prior depreciation already taken while it was only partially rented.)
If you need further assistance I"m happy to help. Just remember, the more details you can provide about your specific situation and setup, the more specific my responses can be to your specific situation.
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