Depreciation Adjustment After Stopping Renting

[Tina20222]

I stopped renting out my investment home in 2024 but still plan to rent it out someday in 2025. I selected "Converted this property from a rental to personal use in 2024", and put 335 days in "Days rented at a fair rental price".  I left "Personal use during the year" blank because we don't live there. The expenses and depreciations don't adjust automatically. I manually adjusted the mortgage interest, RE tax, and insurance, but how do I adjust depreciations. Do I modify the Business %? Thanks,

[DianeW777]

No, there is no reason to modify the business use percentage or take it out of service if you temporarily had repairs. If it was available for rent and will be in 2025, then you should report the income and expenses as usual.

The fact that you have days of rental activity of 335 would indicate it wasn't really removed from service in 2024, and you already indicated there is no and will be no personal use. IRS Publication 527 (page 9).

• Idle Property Continue to claim a deduction for depreciation on property used in your rental activity even if it is temporarily idle (not in use). For example, if you must make repairs after a tenant moves out, you still depreciate the rental property during the time it isn’t available for rent.

Please update here if you have additional questions and we will help.

[Tina20222]

Hi Diane,

Thank you for replying. I read Publication 527 Idle Property but feel it is not very clear. My concern is that I didn't list the house for rent after the tenant moved out in 2024. I will list the house for rent again in a near future. So the house is not ready in service for 5-6 month. Is 5-6 months too long to be reported as a idle property? Secondly, the publication says "Continue to claim a deduction for depreciation", how about insurance, mortgage interest, and RE tax? Thank you!

[PaulaM]

Yes, you can continue to claim necessary expenses while the property is temporarily out of service for repairs/improvements. Complete renovations and extensive repairs often take many months to complete. Major improvements should be capitalized as a rental improvement and depreciated going forward.