I did make it available on VRBO and started advertising in 2022
You can report it on SCH E for 2022 then. The fact your income for 2022 will be zero doesn't matter. The "in service" date will be the date you started advertising, as that's something you can prove if audited.
There's two things about the program.
- The small print matters - big time. So read it. It provides the clarity (some of it) that you *NEED* so you enter information correctly.
- In my opinion (and we all know what opinions are like) some screens don't provide the needed clarity to a level that will ensure you understand and interpret it correctly - meaning you could still provide the wrong data.
I've provided the below in the hopes will it assist you with the needed clarity. Understand that absolute perfection in that first year is not an option. It's a must. Even the tiniest of mistakes will grow exponentially over time. Then when you catch the error years down the road (usually in the year you sell the property) the cost of fixing it *will* be high. So perfection is not an option. It's a must.
Rental Property Dates & Numbers That Matter.
Date of Conversion - If this was your primary residence or 2nd home before, then this date is the day AFTER you moved out, or the date you decided to lease the property – whichever is later.
In Service Date - This is the date a renter "could" have moved in. Usually, this date is the day you put the FOR RENT sign in the front yard.
Number of days Rented - the day count for this starts from the first day a renter was contracted to move in, and/or "could" have moved in. That would be your "in service" date or after if you were asked for that. Vacant periods between renters do not count for actual days rented. Please see IRS Publication927 page 17 at https://www.irs.gov/pub/irs-pdf/p527.pdf#en_US_2020_publink1000219175 Read the “Example” in the third column.
Days of Personal Use - This number will be a big fat ZERO. Read the screen. It's asking for the number of days *YOU* lived in the property AFTER you converted it to a rental. I seriously doubt (though it is possible) that you lived in the house (or space, if renting a part of your home) as your primary residence, 2nd home, or any other personal use reasons after you converted it to a rental.
Business Use Percentage. 100%. I'll put that in words so there's no doubt I didn't make a typo here. One Hundred Percent. After you converted this property or space to rental use, it was one hundred percent business use. What you used it for prior to the date of conversion doesn't count.
