Carl
Level 15

Investors & landlords

If your intent was not to rent the property back out after the repairs were done, then you need to convert it to personal use with an effective date of one day after the last renter moved out, or when you decided you were not going to attempt to rent it out again - whichever is last.

From the looks of it, you decided on Jan 1st not to rent, but to sell. So you would convert it to personal use with a conversion date of Jan 1, 2022. On that date all depreciation stops.  Then, the only deductible expenses are property taxes and mortgage interest as a SCH A itemized deduction. That's it.

Repairs are not deductible if incurred after the conversion date. But understand there is a difference between repairs and property improvements. So what are you calling "repairs"?  How much money we talking about here?

Property improvements add to the cost basis of the property. Those improvements incurred after the last renter moved out were never placed in service before you sold it. THerefore, they would "not" be entered anywhere on the SCH E.

Basically, after converting the property to personal use to stop depreciation (so you can pull definitive amount of depreciation taken) you'd report the sale in the Sale of Business Property section where you could include property improvements in the cost basis, and still be able to recapture all depreciation taken so that it's taxed correctly.

Now I'm not sure, but I think things like monthly HOA fees incurred after converting it to personal use and deciding to sell it, could be included in your sales expenses as carrying costs.