Okay, I got it figured out now. You *WILL* need the IRS Form 4562 for this property from last year's return before you can start. There's three of them, and you need the two that print out in landscape format. One is titled "Depreciation and Amortization Report" and the other is titled "Alternative Minimum Tax Depreciation Report". You'll be using the first one definitely. You "might" be asked for information from the other one, so you want it on hand just in case.
Start working through the rentals & royalty section. When you get to the screen that lists your rental property, click DELETE then YES to confirm the deletion. (We need to get the old stuff out, so it doesn't screw things up later)
Then click the Add Another Rental or Royalty button and start entering data.
- What type of rental is this? Select single family and continue.
- Do any of these situations apply to this property? Select ONLY I rent out part of my home, and I converted this property from a rental to personal use in 2016, then continue.
- Was this property rented all of 2016? Select NO, then for number of days rented, the day count starts Jan 1, and ends on the last day the last renter moved out. For number of days of personal use, that is a big, fat, round, circular ZERO. Then continue.
- Let us Calculate Your Expense Deductions For You - Select YES, then enter your rental percentage of 5%, and continue.
Elect to enter your rental info yourself, and continue on through until returned to the summary screen.
Now elect to start/update Rental Income, and enter the total rental income received for the year.
Next, start Rental Expenses.
On the Enter Common Expenses screen, the three you will enter (I doubt you will enter the others) are for Insurance, Real Estate Taxes, and Utilities. You will enter the total amount that you paid for each, for the entire year. The program will take care of the allocations in the end.
For your utilities, you can total up what you paid for the year for water, gas, electric, cable, and your landline phone (if you have one). Then enter the total amount you paid for all those utilities for the entire year.
For mortgage interest, you will report the total amount reported to you on the 1098-Mortgage Interest Statement.
Now elect to start/update Assets/Depreciation.
- Do you have assets for this property that can be depreciated? Click YES and continue.
- Select NO and continue.
- Did you make any property improvements? I'm assuming you did not. So click NO and continue.
- Select Rental Real Estate Property and continue.
- Select Residentail Rental Real Estate and continue.
- Tell Us About This Rental Asset - Enter the property description here EXACTLY as it appears on your 2015 4562 titled "Depreciation and Amortization Report".
- "Cost" is the total price you paid for the property. The *total* price. It's in "cost (net of land)" on the 4562.
- "Cost of Land" is how much of the above "Cost" was for the land. It's in "cost of land" on the 4562
- Date Purchased or Acquired - this date is NOT on the 4562. It's the date you closed when you originally purchased your house.
Continue to next screen.
- Select "I purchased this asset new", then select "NO I have not always used this item 100% of the time for this business". Then select "I used this item for personal purposes before I started using it in this business".
- Date I started using it in this business - enter 1/1/2015 (pay attention that you enter the correct year, since you did convert that room to rental space in twenty fifteen.)
- Percentage of time I used this item for business. Look at the 4562 column for "Bus Use %" and that's the number you'll enter. My bet is you entered 5% and you were wrong:) But that's okay since you only had it wrong for 2015, and will not be renting it out any more in 2017. (If you want, I will explain why you were wrong later, as well as why you don't need to correct it on the 2015 or 2016 return. Lets just get this done for now.) Now click the CONTINUE button.
- Amount of depreciation taken is prior years - If there is an amount greater than zero in that box, save what you have and talk to me. We need to figure out where it's coming from and see if we need to account for it. Otherwise, to enter the correct figure in this box look at the twenty fifteen 4562. On that 4562 add together the amount in the "Prior Depreciation" column and the "Current Depreciation" column, and enter the total here. Then continue.
The Asset Summary screen shows to the total of your "split" expenses and depreciation allowed for 2016.
You should be good to finish this out from this point on. Let me know how it goes.
