Depreciation questions

[wleighton]

Hi there-

I purchased a 4-plex in January 2020. I am depreciating each unit separately on my Schedule E for this property. One of the units was placed in service as a rental from 2/1/20-5/31/20, then I moved in from 6/1/20-9/31/20, then rented it out again 10/1/20-12/31/20. How do I calculate depreciation on this unit to reflect this? Should I simply adjust the cost basis to 7/11 of original? 

What closing costs can I expense out and what closing costs should I be adding into the cost basis for this property?

From 3/1/20-9/31/20 I rented out my primary residence (a different property), then moved back on 10/1/20.  This unit was rented out from, I think, 2010-2016, during which time I depreciated it. When I moved back in 2016 I dont think I properly converted it to personal use on my depreciation schedule. Can just pick up the depreciation where I left off and start with placed in service on 03/01/20 and converted to personal use 10/1/20? Will I use the same cost basis as I did from 2010-2016? 

[Carl]

One of the units was placed in service as a rental from 2/1/20-5/31/20, then I moved in from 6/1/20-9/31/20, then rented it out again 10/1/20-12/31/20. How do I calculate depreciation on this unit to reflect this? Should I simply adjust the cost basis to 7/11 of original?

Leave the unit in service from 2/1/20 and do not ever take it out of service or convert it to personal use. (Doing so creates more work for you, and doesn't make sense.) Leave the cost basis initially entered alone. Then when asked if the property was rented the whole year, answer no. Then you'll claim/report days rented and days of personal use. The program (not you) will adjust things accordingly to account for the personal use days. On a final note on this item *READ* *THE* *SMALL* *PRINT* on every screen, or you *will* enter the wrong data.

From 3/1/20-9/31/20 I rented out my primary residence (a different property), then moved back on 10/1/20. This unit was rented out from, I think, 2010-2016, during which time I depreciated it. When I moved back in 2016 Can just pick up the depreciation where I left off and start with placed in service on 03/01/20 and converted to personal use 10/1/20? Will I use the same cost basis as I did from 2010-2016?

On your personal residence, you can't just "pick up where you left off" unfortunately, as it doesn't work that way. You "MUST" reduce your cost basis of the structure (not the land) by the total amount of depreciation taken previously. Then depreciation will start over from year one with that reduced cost basis,

I dont think I properly converted it to personal use on my depreciation schedule.

You can't "think" on this. You must "KNOW" beyond any doubt.  If you've been depreciating the property since 2016-2020 while it was your primary residence, then you have a *major* screw-up that you can't just fix yourself. You're required to file IRS Form 3115-Change in Accounting Method, to fix the mistake. This form is not simple by any stretch of the imagination and requires professional help. Especially if you state taxes personal income, as the potential fines and penalties could be a double-whammy; especially if the 3115 is not done correctly.

So if you have "in fact" been showing your primary residence on SCH E 2016-2020 you need to seek professional help to fix it.

[wleighton]

Sorry for the confusion- it is not that I have been depreciating or showing my personal residence on a Schedule E from 2016-2020, it is that I just simply stopped depreciating and began claiming it as my personal residence again (without properly converting to personal use/disposing of). The program I am using does not ask me for any information regarding days of personal use vs. days of business when running through depreciation step by step (although i was careful about reading the tricky fine print on this one for the general info section for my schedule e). On form 4562 I could enter the percentage business use which I could calculate based on the number of days out of the year it was rented after placing it in service. For the cost basis I would take the original cost basis, minus the accumulated depreciation (through 2015) and put it back in service 3/1/20 with that amount as my new cost basis? (Just to confirm, side note question- for my properties which have been continuously rented out for years, the cost basis should remain the same every year, correct?) Or would I use the fair market value at the time of placing it back in service, which is significantly less than my original cost basis? And then should I dispose of/convert to personal use on 10/1/20, when I moved back, or just stop depreciating again at that point? For my understanding and future reference, if I were to ever rent it out again, I could again decrease the original cost basis by the total accumulated depreciation (including 2020), and depreciate based on that new basis? @Carl