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Level 1
posted Dec 31, 2023 2:10:06 AM

Converting property from rental to residential

Have been renting a property to my daughter and son-in-law for 10 years. Want to convert the property to residential and have them continue to live there free. How do I set this up in TT? TIA.

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20 Replies
Level 15
Dec 31, 2023 5:55:04 AM

As you complete the Sch E interview screens you will indicate the property was converted to personal use and in the asset section you will take all of them out of service ... just follow the screen instructions. 

Level 15
Dec 31, 2023 9:43:58 AM

if you were renting at fair rental be wary that you need to keep track of any depreciation allowed but that will be subject to recapture when you sell despite the fact it is now a personal residence. Turbotax will not do it. 

Level 1
Jan 9, 2024 12:57:02 AM

Looking at Sch E and would like to know if it is best to enter all the 365 days as personal use. What entries in the asset section are you talking about? TIA.

Level 15
Jan 9, 2024 7:00:36 AM

@archimedes --

 

The IRS considers any day you rent to family members below FMV as a day of personal use.

https://www.irs.gov/taxtopics/tc415

Level 15
Jan 10, 2024 5:31:12 AM

To show the IRS that you converted the property from Residential Rental Real Estate, to personal use:

In the Assets/Depreciation section you must work through each individual asset one at a time.

On the screen for "I stopped using this asset in 2023" select YES.

On the screen for "Special Handling Required?" select YES. (If you select no, you will be FORCED to enter sales information. Since you didn't sell the property, you must select YES.)

If you claimed any vehicle expenses for this rental, then you must also work through the business vehicle expenses section and do the same to convert the vehicle to personal use.... even if the business use was less than 100%.

After you have completed and filed your taxes, you also need to print a few things from your ACCEPTED tax return and keep them for your records.

1) Print the IRS Form 8582. This form shows your passive loss carry overs. You will need this information as explained below.

2) There are two form 4562's. One is titled "Depreciation and Amortization Report" and the other is "Alternative Minimum Tax Depreciation Report". Print both, as you will need them later as explained below.

 

In the future, one of three things "will" happen in your life.

1) You sell the property.

2) You convert the property back to a rental or any other business use.

3) You die.

You will need these printouts to correctly report events 1 and 2, and your estate/heirs "may" need it (mainly for reference) in dealing with whatever happens to the property if you die. Note that it is perfectly possible The 8582 maylnot be present. That just means that you have no losses to carry over, and is perfectly possible due to changes in tax law that took effect in 2020 or thereabouts. File these papers with your property ownership documents so they'll be easy to find when needed in the future. If you have reported the conversion correctly, then nothing concerning this property will be imported into future tax returns.

 

Level 1
Feb 5, 2024 12:56:03 PM

I haven't been able to find the "Assets/Depreciation" section you mentioned? Is there a form I can get there from? TIA.

Level 1
Feb 5, 2024 12:59:48 PM

I could not find the "Assets/Depreciation" section you mentioned. Can I get there from one of the forms? YIA.

 

Expert Alumni
Feb 5, 2024 12:59:53 PM

Please clarify:

  1. Did you ever set the property up as an asset for depreciation?
  2. Have you since removed the property as an asset?
  3. Have you charged fair rental value (FRV) at any time while your daughter and son-in-law lived there?

More information will allow us to give your specific details for your situation.

 

@archimedes 

Level 15
Feb 6, 2024 5:38:26 PM

I could not find the "Assets/Depreciation" section you mentioned.

It's there. Start over in the Rental & Royalty Income (SCH E) section of the program. Elect to edit your rental and work through the screens. You'll come to one with four (or more) buttons on it.
Rental Income

Rental Expenses

Assets/Depreciation (Shows as Sale of Property/Depreciation when you sell or show some other change in or disposition of the property)

Business Vehicle Use (Or something pertaining to vehicle use in your rental business)

Select Assets/Depreciation and at an absolute minimum you will see the property itself listed there. If there's nothing listed, you have a major issue that must be addressed ASAP.

Level 1
Mar 4, 2024 9:09:38 AM

I  bought the property in 2010 and rented it through 2022, using TT to file returns. I paid taxes on the income every year. I paid off the mortgage in Oct of 2023. I still can't find the Assets/Depreciation section you mention.

Expert Alumni
Mar 4, 2024 2:30:07 PM

Follow these steps to access the residential rental asset, then follow the excellent instructions outlined by Carl.

 

In TurboTax Online, access the residential rental asset as follows:

 

  • Down the left side of the screen, click on Federal.
  • Down the left side of the screen, click on Wages & income.
  • Scroll down to Rentals, Royalties, and Farm.  Select Show more.
  • Select Start / Revisit to the right of Rental Properties and Royalties.
  • At the screen Your 2023 rentals and royalties summary, select Edit.
  • At the screen Here's rental property info, select Edit to the right of each rental property asset.
  • At the screen Tell us more about this rental asset, select The item was sold, retired, stolen, destroyed, disposed of....
  • Enter the date retired from use.
  • At the screen Special handling required, select Yes.

In TurboTax Desktop, access the residential rental asset as follows:

 

  • Select Federal Taxes.
  • Select Wages & Income.
  • Select I'll choose what I work on.
  • Scroll down to Rental Properties and Royalties.
  • Select Start/Revisit to the right of Rental Properties and Royalties.
  • Select Assets/Depreciation under the Rental Review.

@archimedes 

 

Level 15
Mar 4, 2024 3:01:15 PM

@JamesG1 please check the boiler you used for posting above, and update it to reflect the correct tax year. 🙂

 

Level 1
Mar 4, 2024 11:53:33 PM

Currently using TT 2023 H&B desktop. I previously marked the property as switched to personal use and now it's not showing up in the Rental and Royalty Properties. How do I get back there?

Level 1
Mar 4, 2024 11:54:42 PM

I don't understand what you mean by "boiler".

 

Level 1
Mar 6, 2024 11:36:13 AM

1. Never set up the property as an asset for depreciation.

2. Never removed the property as an asset.

3. Rent was fair market value at time of first renting (2010) but never changed since then.

TIA.

Expert Alumni
Mar 6, 2024 12:26:28 PM

It seems you need to go back to square one and enter your Rental Property.

 

-First section is 'Property Profile', where you can indicate when you started renting it, that you converted it to personal use in 2023, and that you rented below market value (number of days rented in 2023 is number of days of personal use), ownership, etc.  There are several screens in this section.

 

-Back at the Rental Topics page, go down to 'Assets/Depreciation', where you need to enter how much you paid for the house and land, when you purchased it, when you started renting it, and if you used it for personal use before renting.  Again, you will indicate you 'converted to personal use' and the date. TurboTax will display an amount on a page for 'prior depreciation' based on the date you started renting, and cost. 

 

-Back at the Rental Topics page, you can enter Rental Income and Expenses for 2023.  Your expenses will be limited as you are renting at below market value.

 

@archimedes 

 

 

 

 

 

 

 

 

Level 1
Mar 6, 2024 2:36:49 PM

To all the good people who are trying to help me:

 

To all the people trying to help me,

 

Using TT Desktop H&B 2023. The problem I seem to be having is that what I am seeing in my TT differs from what folks are telling me I should see.

 

From the top,

 

1. Start a new return.

2. Import return data from 2022 TT.

3. Review and confirm imported data from 2022.

4.Next Screen I see is "Let's find some business deductions". Select continue.

5. Next screen select "I'll choose what I work on".

6.Next screen "Rental Real Estate and Royalties". has "Yes" and "No" buttons. Do I leave the "Yes" button checked or do I choose "No"?

7. If I select "No" I eventually get to a screen with a choice to select "I converted this property from rental to personal use in 2023". If I select that any info about the property disappears from TT and I don't know how to proceed from there.

 

 I have never claimed the property as an asset and was never asked by TT if I wanted or needed to. I have never been able to find the "Assets" sections refereed to by the respondents here   That's why I'm stuck where I am and cannot see where to go from here.  Any help appreciated. TIA.

 

Level 15
Mar 6, 2024 4:25:17 PM

What you describe gets to to the main rental property entry where you have to select the EDIT button to actually "do" anything. Then you have choices:

- Property Profile

 - Rental Income

 - Expenses

 - Assets/Depreciation

 - Vehicle Expenses

Select Assets/Depreciation. If you are presented the option to "Go directly to your asset summary", select YES then continue. Otherwise, read the next line below.

If asked if you bought anything less than $2,500, select NO then continue. Otherwise, read the next line below.

If asked if you made improvements in 2023, select NO and continue. Otherwise, read the next line below.

 

At this point, you "SHOULD" see at an absolute minimum, the property itself listed.  If you have more than that, let me know. Is this what you experience? If it's not what you experience, then what "do" you experience? I will also need to know in what tax year you started reporting this property on SCH E. I know you may have mentioned it above. But this thread is so long now, I would rather not have to read through it all for a third time. 🙂

Level 1
Mar 7, 2024 3:33:37 AM

To all the good people here trying to help me,

 

Using TT Desktop H&B 2023. The problem I seem to be having is that what I am seeing in my TT differs from what folks are telling me I should see.

 

From the top,

 

1. Start a new return.

2. Import return data from 2022 TT.

3. Review and confirm imported data from 2022.

4.Next Screen I see is "Let's find some business deductions". Select continue.

5. Next screen select "I'll choose what I work on".

6.Next screen "Rental Real Estate and Royalties". has "Yes" and "No" buttons. Do I leave the "Yes" button checked or do I choose "No"?

7. If I select "No" I eventually get to a screen with a choice to select "I converted this property from rental to personal use in 2023". If I select that any info about the property disappears from TT and I don't know how to proceed from there.

 

 I have never claimed the property as an asset and was never asked by TT if I wanted or needed to. I have never been able to find the "Assets" sections refereed to by the respondents here   That's why I'm stuck where I am and cannot see where to go from here.  Any help appreciated. TIA.

 

Level 15
Mar 7, 2024 5:27:30 AM

@archimedes 

 


The program interview does indeed bring forth the asset entry section when setting up the rental in the system so if you did not notice it and/or cannot find that section now then I highly recommend you upgrade to one of the LIVE options this year to get one on one directions where they can help you screen by screen.  OR  us a local tax pro who can educate you in this situation.