Carl
Level 15

Investors & landlords

Sounds to me like you have quite a bit more personal use that you do business (rental) use. Perhaps the below will help? I can't be sure.

Personal use - number of days you lived in the property as your primary residence, 2nd home or vacation home ***AFTER*** the date you converted the property to residential rental real estate. What you did with the property prior to the conversion date, doesn't count for anything.

Days rented - Generally, the count starts on the first day a renter "could" have moved in. Doesn't matter if the property sat empty for 3 months between the date of conversion, and the date the first renter moved in. Vacant periods between renters count also, provided you did not live in the property (as clarified above) for one single day.

Example:

Property converted to rental on June 1st, and was move-in ready and "available for rent" on July 1st. The day count from July 1st through Dec 31st is 182 days.

On August 1st the property still didn't have a renter in it, even though you've been advertising since July 1st. You decide that you and your family will stay in the property for 2 weeks, while the kitchen in your primary residence is being remodeled. So you have 14 days of personal use from August 1st through Aug 14th.

In Sept you find a renter and sign a contract for an Oct 1 move in.

Out of 182 days you have 14 days of personal use, and the property was rentable for 168 days. Expenses will be adjusted accordingly. With my scenario, 14 days of personal use means the property was business rental use for 92% of the time. So only 92% of all your expenses will be allowed as a deduction on SCH E.

If you were to use actual days the renter was in it, that would be wrong. You'd have 14 days of personal use, 92 days rented, and the remaining 76 days just "out there" in la-la land. This would hurt on the mortgage interest deduction, since 50% of the interest would not be deducted on either SCH E or claimed on the SCH A as an itemized deduction.