One SCH E is used to report up to 3 rental properties. On your 2019 return you will be reporting two rental properties "AS IF" they were two physically separate properties.
First, you will convert the existing rental property to personal use. Start working it through and select the option for "I converted this property to personal use in 2019" and then press on. Enter all rental income and all rental expenses incurred up to the date the last renter physically moved out.
Next, you will work through the Assets/Depreciation section. If you have more than one asset listed, you must work through each individual asset one at a time and do the below for each individual asset.
- When asked if you "stopped using this asset in 2019?" click the YES button.
- On the "Special Handling Required?" screen, click the YES button.
- Write down the amount of prior year's depreciation taken and the current year depreciation.
- For the date of disposition/conversion, enter the date that is one day after the last renter moved out.
You *MUST* do the above four things for each individual asset listed in the Assets/Depreication section. The conversion/disposition date *must* be identical for all assets listed.
Work things through until you're returned to the summary screen. On that screen click the "Add Another Rental or Royalty".
Now work it through making sure to read the small print on each screen as you go. The small print matters and if you don't read/head it you will mess this up. I guarantee it.
When you are done chances are extremely high that the first year depreciation will be wrong. So you need to manually confirm it is right. To do that, use the MACRS worksheet from IRS Publication page 38 at https://www.irs.gov/pub/irs-pdf/p946.pdf The table you will need for line 6 of that worksheet is Table A-6 on page 70.
Once you have completed your tax return in it's entirety, you will need to print it. You will need this 2019 tax return at some time in your future when one of three things happen in your life.
- You convert the property back to full rental use.
- You sell the property
- You die.
