Investors & landlords
The IRS has a two-fold selection to determine personal use days. IRS Topic 415 describes the following for rental use and personal use property
If you rent a dwelling unit to others that you also use as a residence, limitations may apply to the rental expenses you can deduct. You're considered to use a dwelling unit as a residence if you use it for personal purposes during the tax year for a number of days that’s more than the greater of:
- 14 days, OR
- 10% of the total days you rent it to others at a fair rental price.
Next is the way to calculate a weighted average of the business use portion of the assets, as well as the selling price and sales expenses for each asset.
- If you use the dwelling unit for both rental and personal purposes, you generally must divide your total expenses between the rental use and the personal use based on the number of days used for each purpose.
For the rental portion of the return: You can enter the accurate business use percentage in the rental property section for the current year and select that you disposed of the property. However, in the rental section do NOT say it was sold.
For the sale portion of the return: This will require manual entries for the sale of business property portion of the tax return. Gather your numbers after calculating the weighted average for each asset, including the current year depreciation for all assets and then enter the sale manually in the Sale of Business Property section (Form 4797).
For the personal use portion, you will sell it like a second home sale under Investment Income.
