Yes, you can enter it as a rental for both 2024 and 2025, then convert it to personal use in 2025. This applies because you will place it in service available for rent in 2024, even though you didn't receive rent in 2024, then use it for rental again in 2025. As of 2024, your intent is to use it as a rental going forward and your lease is proof of intent. The fact the tenants decided to cancel was not foreseen.
- Per IRS Publication 946: To be depreciable, property must have a useful life that extends substantially beyond the year you place it in service.
Combine the original cost plus purchase expenses as well as any capital improvements to arrive at the cost of the house and land. Use your property tax assessment to allocate the amount to the house and the land. This will be one asset entered in the rental activity. Repairs are not generally capital in nature depending on exactly what they are. They could be an expense if they do not increase the life of the house.
NOTE: Keep all of this data with your tax records because at any time in the future if the property is sold, it will be a taxable event and depreciation expenses used will be needed.
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