Neither. The assessed value is very different than the fair market value (FMV). Assessments can be higher or lower than FMV. The IRS lets you know that you must base the depreciable value of the rental property on what you actually paid for the property or the FMV whichever is lower on the date of conversion.
- Fair Market Value (FMV) is an estimate of the market value of the property, based on what a knowledgeable, willing, and unpressured buyer would probably pay to a knowledgeable, willing, and unpressured seller in the market. This is basically what a property sold for in your neighborhood with the same or similar specifications and conditions.
For your convenience I have included some instruction on how you enter a rental property that was converted to a rental property.
Beginning with the month it became available for rent
this would be the first month of actual rental conversion. This
does not have to be the first month it was rented, however it does have to be a
month where it was decided it would be available to be rented.
There are special
steps when a property was converted from personal use to rental use.
TurboTax will carry the personal portion of mortgage interest and
property taxes to the itemized deductions and the rental portion to the
Schedule E.
In TurboTax Home & Business
follow these steps and the screenshots attached.
- Business Tab
- Rental Properties
- Click Yes
- Click None of the above for
Real Estate Professional
- Click Edit or continue to
enter it for the first time
- Enter property address and
owner
- Continue
- Click Single family home
- Click New and Converted to
Rental
- Click Continue and Continue
- Click No this property wasn’t
rented all year (unless the answer is yes)
- Enter days rented and days of
personal use
- Click continue
- Select the appropriate
response on ownership
- Continue
- Click Yes I owned this
property all year
- Click Continue
- Click Yes I am an active
participant
- Click Continue
- Click No or Yes whether you
paid more than $600 in services to one individual
- Click Enter my rental info
myself
- Click Continue
- Click None of the above
unless something applies to your area
- Click Update on Assets
- Click the appropriate answer
for purchases less than $2500 (I selected no in my test)
- Click continue
- Select the appropriate
response to capital improvements to the home in 2015 (I selected no in my
test)
- Click Edit for house asset
- Select Rental Real Estate,
then click continue
- Select Residential Rental
- Enter the required
information (Description, Cost, Land Value if added to cost, date
acquired)
- Click continue
- Select No, I have not always
used this item 100% of the time for business
- Select I used this item for
personal purposes before using it in this business
- Enter the date in 2015 you
began using it for business (be sure to account for the days of rental
use/personal use)
- Do not enter a percentage, it
should already be populated for you
- Click continue
- This screen shows the
estimated amount of depreciation and you can select the details button
