Our situation.
We bought our house (house A) in 1997 and used it as our primary residence until 2008 when we needed and bought a larger house (house B). However 2008 is when the housing market crashed and we did not sell house A but converted it to a rental. Our primary residence was house B and reported depreciation, etc. for house A on Sch E. So far so good.
We since retired and needed to downsize, so we told our tenets that they would have to move by Feb 1, 2023. For tax purposes I intend to use this date to convert house A to personal use. From Feb. 1 to July 31, 2023, house A was unoccupied as improvements were being made (remodeled kitchen, bath, floors, electrical service upgrade, replaced attic insulation, replaced old fence). These improvements will be added to the basis when we eventually sell the house. There was no intention to make the house available as a rental.
On Aug. 1, 2023, we moved back into house A and made it our primary residence. We still own house B as we work to get it ready to put on the market in 2024.
Based on my understanding, we will claim house A as a rental for the month of January (31 days) only with no depreciation after that. Mortgage interest, insurance premiums, and property taxes will be 1/12 of the total for the year and reported on Sch E. 11/12 of these items will be reported as Itemized Deductions on Sch A since house A was for personal use (although technically unoccupied while work was going on).
Do I have this right so far?
We also still own house B. It was our primary residence January through July when we moved into house A on Aug 1. House B has been unoccupied since Aug 1 as we clear it out and get it ready to be put on the market. We report mortgage interest, insurance premiums, and property taxes as we normally would on Sch A.
Does it matter whether or not a house was the primary residence as long as it was for personal use?
Do I enter the mortgage interest, insurance premiums, and property taxes in TT for both houses separately similar to a refinancing situation where there may be two mortgages to report for the same house, or does TT have a way to identify separate houses since I will be reporting partial sums (11/12) for house A. Will this cause a red flag at the IRS?
Am I missing anything? Are there any peculiarities in TT that may hinder or facilitate entering information correctly?
Any improvements and additions to the basis for house A, as well as recapturing depreciation during the rental years will not affect 2023 taxes but will only come into play when house A is sold in the future. Correct?
I hope I have all this right, probably making it more complicated than it really is.
Thanks in advance.
