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Converted a property from rental to personal use, and then back to rental again within the same year. How to enter this in Turbo Tax 2017?
The property was converted to a rental in 2016. In 2017, the property was available for rent from Jan 1 - Feb 28, and then converted to personal use from Mar 1 - Sept 30. Then, became a rental again from Oct 1.
In the questionnaire, I checked both boxes.
1. "I converted this property from personal use to a rental in 2017".
2. "I converted this property from a rental to personal use in 2017."
When I get to the depreciation section, I entered the following dates for the "disposition information".
Date of sale or disposition: Apr 1, 2017
Date Acquired: The date the property was first purchased in 2015.
I was never asked about the date that the property was converted from personal back to rental again (Oct 1, 2017). And the depreciation is only calculated for Jan-Feb (no depreciation for Oct-Dec).
Where can I input the data for the conversion back to a rental on Oct 1?
The only way I can think of is to add it as second asset put into service on Oct 1, even though it's the same asset.
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I would prefer to do it the other way if possible. Is it not allowed to convert from rental to personal, and then convert back to rental again in the same tax year? The depreciation deduction is not needed in 2017 so I would prefer to only depreciate 5 months of the year in order to keep the cost basis higher. Then the capital gains tax / depreciation recapture will be less when the property is sold.
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I would make the adjustment directly on the depreciation report (looks like a spreadsheet). You'll have to manually calculate the amount of depreciation. What you enter will be carried forward.
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What about adding it as another asset to deal with the conversion from personal back to rental on Oct 1? I believe the cost basis and depreciation amount would have to be re-calculated anyway. Then, all the data would carry over to 2018 TT to continue the depreciation under the second asset.
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If you don't let the program "do the work" the way it's designed to work, then in the tax year you sell the property, the TurboTax program will be unable to correctly report the depreciation recapture.
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But if I may ask @James why was it personal use for 7 months? If you did not live in the house during that time, there is no need or requirement to declare that time as personal use. Were you doing major renovations maybe?
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If the form 4562 only allows for one conversion date then I guess it's not possible to do it the way I wanted to. I will have to do the ratio of personal days to rented days and take the depreciation for the whole year. I was hoping to minimize the depreciation by converting it to personal from April-October but it looks like this is not possible.
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