Converting Rental Property Condo to Personal Use - tax implication

[taxesohmy2017]

I have a question for this upcoming tax season 2023.  My main residency is in CO. I have rental property "Condo" in Florida.  For the last 15 years, the Condo was rental out 365 days a year.  In 2023, me and my wife decided we want convert the Condo back to personal use.  We want to escape the Colorado winters and head to Florida.   The 7 months in 2023 we rented out the Condo so we will be claiming the income and expenses on our Schedule E. 

August through December 2023 and moving forward this will be used for our personal use - vacation home.  My question is would I recapture the depreciation in 2023 for all the years we took that expense or does that happen when I sell the condo down the road?  Also, the tenants left the place in bad shape after they moved out - my question are the repairs or renovations for the damages they did during their moving out, is that a tax deduction on the schedule E or would we put that cost towards our cost basis when we go to sell the Condo down the road? 

P.S. We took pictures of the damages for our records incase someone questions it.

We are just trying to prepare ourselves.   

thank you

[Mike9241]

  My question is would I recapture the depreciation in 2023 for all the years we took that expense or does that happen when I sell the condo down the road? 

When you sell 

Also, the tenants left the place in bad shape after they moved out - my question are the repairs or renovations for the damages they did during their moving out, is that a tax deduction on the schedule E or would we put that cost towards our cost basis when we go to sell the Condo down the road? 

you've converted to personal use thus the repairs made after the tenant move out are not deductible, nor do they add to basis. However, if any were capital improvements rather than repairs, they would.

[taxesohmy2017]

thank you and one last question, I originally purchased the Condo back in 2008 for $180K. That is what was reported on my Form 4562 and the depreciation was based off of that.  Since I am converting it personal use, I have to get it appraised and that appraisal will be my new purchase price when I go to sell it correct? And the appraisal has to be done before any renovation takes place, correct?

And up to until July 2023, I accumulated $90K for depreciation, that $90K would be the recapture in the future? I just want keep that $90K in mind for future tax purposes.

thank you

[tagteam]

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@taxesohmy2017 wrote:

I have to get it appraised and that appraisal will be my new purchase price when I go to sell it correct? 

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No, you do not need to get the condo appraised when converting it to personal use. 

Your cost basis of $180,000 will still be your cost basis (when you eventually sell) and your adjusted basis will be $180,000 less accumulated depreciation plus the cost of improvements made.

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@taxesohmy2017 wrote:

And up to until July 2023, I accumulated $90K for depreciation, that $90K would be the recapture in the future? I just want keep that $90K in mind for future tax purposes.

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Yes, you should absolutely continue to keep track of your accumulated depreciation; it will be a critical component in calculating gain/loss (and recapture) when you dispose of the property.