The property was converted to a rental in 2016. In 2017, the property was available for rent from Jan 1 - Feb 28, and then converted to personal use from Mar 1 - Sept 30. Then, became a rental again from Oct 1.
In the questionnaire, I checked both boxes.
1. "I converted this property from personal use to a rental in 2017".
2. "I converted this property from a rental to personal use in 2017."
When I get to the depreciation section, I entered the following dates for the "disposition information".
Date of sale or disposition: Apr 1, 2017
Date Acquired: The date the property was first purchased in 2015.
I was never asked about the date that the property was converted from personal back to rental again (Oct 1, 2017). And the depreciation is only calculated for Jan-Feb (no depreciation for Oct-Dec).
Where can I input the data for the conversion back to a rental on Oct 1?
The only way I can think of is to add it as second asset put into service on Oct 1, even though it's the same asset.
When asked if the unit was converted from personal use or converted to personal use in 2017, answer no. When asked if rented all year answer no, then enter the number of days for rental and personal use. TT will do the rest, allocating the expenses between personal and rental. There was no "disposition".
Thanks for your answer.
I would prefer to do it the other way if possible. Is it not allowed to convert from rental to personal, and then convert back to rental again in the same tax year? The depreciation deduction is not needed in 2017 so I would prefer to only depreciate 5 months of the year in order to keep the cost basis higher. Then the capital gains tax / depreciation recapture will be less when the property is sold.
TT can't do that. You'll have to use a works around. Since you have the download version (not online) that can be done in the forms mode.
I would make the adjustment directly on the depreciation report (looks like a spreadsheet). You'll have to manually calculate the amount of depreciation. What you enter will be carried forward.
Ok, thanks. I will look into that.
What about adding it as another asset to deal with the conversion from personal back to rental on Oct 1? I believe the cost basis and depreciation amount would have to be re-calculated anyway. Then, all the data would carry over to 2018 TT to continue the depreciation under the second asset.
I don't think that's appropriate. Also the work around would be very tricky.
Actually, there is no "work around" that will do things correctly. Either way you do it will end up with the exact same bottom line results (assuming you manually do the math correctly, which is not as simple as you think.). Just do no conversion at all, indicate the property was not rented all year then enter number of days a rental, and number of days personal use. The program will then do the splits for you.
If you don't let the program "do the work" the way it's designed to work, then in the tax year you sell the property, the TurboTax program will be unable to correctly report the depreciation recapture.
You are asking a lot of questions for this situation ... may I suggest using a paid preparer this year since the situation is unusual and the program doesn't handle unusual well. And if you make any over rides in the FORMS mode then you will void the accuracy guarantee & efiling will not be allowed.
Actually Critter, the situation is not unusual at all. Even CPAs do it the way the program is designed to do it. One of the reasons for that is because the form 4562 only has allowance for one conversion date. So if you converted in the same year from rental to personal back to rental, you don't show any "conversion" at all. You just declare the number of days of personal use while it was classified as a rental.
But if I may ask @James why was it personal use for 7 months? If you did not live in the house during that time, there is no need or requirement to declare that time as personal use. Were you doing major renovations maybe?
@Carl It is a vacation home in Arizona. It's usually rented between Nov-Mar, used for some personal days in April and October. Between May-Sept the weather is too hot, there is no rental market and no desire to have any personal days during that time.
If the form 4562 only allows for one conversion date then I guess it's not possible to do it the way I wanted to. I will have to do the ratio of personal days to rented days and take the depreciation for the whole year. I was hoping to minimize the depreciation by converting it to personal from April-October but it looks like this is not possible.
Ok ... that is your problem ... you had a vacation home that was rented only part of the year ... you did NOT take it out of service or CONVERT it to personal use then back again. When you enter how many days it was rented and how many was personal use then the program will automatically use the vacation home rules.
Critter is exactly right. Understand that when you claim personal use days, that does affect the depreciation allowed so long as the number of personal use days is over 15 days for the whole year. So for your personal use days you'll declare all days for the period Nov-Mar plus any personal use in April and October. There will be no conversion, as there's no need for it.