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jzhangken
New Member

How do I put personal use days?

We lived in our home until 04/29/2017, my parents stayed there till 05/21/2017. The place was then vacant until 07/20/2017 when the tenant moved in. In the page where Turbo Tax asks:

Days rented at a fair rental price and Personal use during the year. 

What should I put for personal use days? The note says I should not count the days we lived there. That case it is only the days between 04/29 - 05/21?


Thanks

16 Replies
Carl
Level 15

How do I put personal use days?

Your personal use days are ZERO. The screen is asking you the number of days you lived in the property as your primary residence or 2nd home *while the property was classified as a rental*. What you used the property before prior to converting it to a rental does not matter, and counts for nothing.

Also, your business use percentage is 100% (one hundred percent). The program is asking what percentage of time you used the property for business, during the time it was classified as rental property. What you used the property for prior to converting it to a rental, does not count for anything.

Being that I get the impression you are a first time landlord, I hope you find the below useful, helpful and educational. It will also help you avoid many common errors that first time landlords make. It is EXTREMELY IMPORTANT that your numbers be absitively positutely spot on PERFECT the first year. If they are off even slightly, such errors have the possibility of becoming exponentially bigger as years pass. Then when you catch the error down the road, the cost of fixing it (in the form of back taxes, underpayment penalties and fines) can be quite $costly$. So if unsure, then by all means, please ask.

            • Rental Property Dates & Numbers That Matter.

Date of Conversion - If this was your primary residence before, then this date is the day AFTER  you moved out.
In Service Date - This is the date a renter "could" have moved in. Usually, this date is the day you put the FOR RENT sign in the front yard.
Number of days Rented - the day count for this starts from the first day a renter "could" have moved in. That should be your "in service" date if you were asked for that. vacant periods between renters count also PROVIDED you did not live in the house for one single day during said period of vacancy.
Days of Personal Use - This number will be a big fat ZERO. Read the screen. It's asking for the number of days you lived in the property AFTER you converted it to a rental. I seriously doubt (though it is possible) that you lived in the house (or space, if renting a part of your home) as your primary residence or 2nd home, after you converted it to a rental.
Business Use Percentage. 100%. I'll put that in words so there's no doubt I didn't make a typo here. One Hundred Percent. After you converted this property or space to rental use, it was one hundred percent business use. What you used it for prior to the date of conversion doesn't count.

    • RENTAL POPERTY ASSETS, MAINTENANCE/CLEANING/REPAIRS DEFINED

Property Improvement.

Property improvements are expenses you incur that add value to the property. Expenses for this are entered in the Assets/Depreciation section and depreciated over time. Property improvements can be done at any time after your initial purchase of the property. It does not matter if it was your residence or a rental at the time of the improvement. It still adds value to the property.

To be classified as a property improvement, two criteria must be met:

1) The improvement must become "a material part of" the property. For example, remodeling the bathroom, new cabinets or appliances in the kitchen. New carpet. Replacing that old Central Air unit.

2) The improvement must add "real" value to the property. In other words, when  the property is appraised by a qualified, certified, licensed property appraiser, he will appraise it at a higher value, than he would have without the improvements.

Cleaning & Maintenance

Those expenses incurred to maintain the rental property and it's assets in the useable condition the property and/or asset was designed and intended for. Routine cleaning and maintenance expenses are only deductible if they are incurred while the property is classified as a rental. Cleaning and maintenance expenses incurred in the process of preparing the property for rent are not deductible.

Repair

Those expenses incurred to return the property or it's assets to the same useable condition they were in, prior to the event that caused the property or asset to be unusable. Repair expenses incurred are only deductible if incurred while the property is classified as a rental. Repair costs incurred in the process of preparing the property for rent are not deductible.

Additional clarifications: Painting a room does not qualify as a property improvement. While the paint does become “a material part of” the property, from the perspective of a property appraiser, it doesn’t add “real value” to the property.

However, when you do something like convert the garage into a 3rd bedroom for example, making a  2 bedroom house into a 3 bedroom house adds “real value”. Of course, when you convert the garage to a bedroom, you’re going to paint it. But you will include the cost of painting as a part of the property improvement – not an expense separate from it.


basiq
New Member

How do I put personal use days?

Hi there,

I'm a little confused by this answer. You say that number of days rented counts since the day a renter could move in, however TurboTax explicitly says that for "number of days vacant at FMV" to not count days when a rental is vacant. So which one is it?

Carl
Level 15

How do I put personal use days?

The "days rented" starts on the first day a renter "COULD" have physically moved in.  The only way that number would be different is if there was any personal use of the property "AFTER" the first day a renter could have moved in. Since your personal use days is ZERO, the days rented count starts the first day a renter could have moved in.

 

RichardMMMM
Level 3

How do I put personal use days?

Hi!

Can I confirm I understand? I am in a similar situation for 2021.

This is my first time as a live-in landlord.

 

I purchased a home

I lived in the home by myself for a few months.

Then I rented it to another, and I still live there.

So can I confirm that my personal use days are zero?

OR

Are my personal use days the days I lived alone? The days I lived with my renter?

Thanks! Let me know if providing specific dates would help.

AnnetteB6
Expert Alumni

How do I put personal use days?

The period of time that you lived in the home on your own is not considered at all.  You did not have a rental property until you decided to make part of your home available for rent and you began to advertise it to find a tenant.

 

If you used that rental space for personal purposes after you began to advertise it and before your tenant moved in, then you would count that time as personal use days.  Typically, there would be no personal use days because the space would be ready for a tenant or used by your tenant and not by you.

 

When you are entering your information into TurboTax, be sure that you check the box saying that you rent out part of your home and that you converted it from personal use to a rental during 2021.

 

@RichardMMMM

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Carl
Level 15

How do I put personal use days?

Then I rented it to another, and I still live there.

To clarify, it is being assume that you rented "a part of" your residence to a 3rd party.  Even so, the number of personal use days will be "ZERO" unless you used the rented portion of the property for your personal use *AFTER* you converted it to a rental. If you did not, then that portion of the property is ONE HUNDRED PERCENT business use.

Also, note there is a screen where you are asked for a 2nd time, what "percentage of time" the property was rented for the year. In your specific case becuase you are renting "a part of" your residence, that question should be asking percentage of floorspace - not percentage of time. So enter percentage of floor space. Otherwise, your first year depreciation will be wrong and the program will *not* flag it. (But the IRS will if for some reason your return gets flagged for something such as a random audit)

RichardMMMM
Level 3

How do I put personal use days?

Carl and @AnnetteB6 

 

Can you help direct me towards the screen that asks about percentage of time or floor space? I keep looking and I can't find it. I will keep looking in the meantime.

Carl
Level 15

How do I put personal use days?

In the Assets/Depreciation section elect to Edit the property and start working it through. Here's what the screen looks like in the Cd/Desktop version of the program.

floorspace.png

RichardMMMM
Level 3

How do I put personal use days?

I think it might be in the rental property info under "situations" for turbotax as well. I'll make sure to also check the helpful information you just listed above!

RichardMMMM
Level 3

How do I put personal use days?

Hi!

 

I wanted to clarify about choosing the percentage. I think my rental percentage is 50% because I am a live-in landlord for 2 br 2ba and my renter gets 1bed1ba to themselves as well as access to all common areas.

 

Is this a correct assessment?

I originally thought I had to use square footage but turbotax says bedroom is acceptable, I think.

 

From Turbotax:

"You can use any reasonable method to determine the percent of your home being rented. Most commonly, you can base it on the number of rooms rented to total rooms, or based on the square footage of the rental space compared with total square footage. You could also base it on the number of people in the rented portion compared to the non-rented portion."

Carl
Level 15

How do I put personal use days?

Is this a correct assessment?

It's not incorrect. But the more common method is percentage of square footage.

I originally thought I had to use square footage but turbotax says bedroom is acceptable, I think.

In my experience with past versions of the program, it would actually walk you through figuring out the percentage of square footage.  But a few things to clarify here.

When it comes to figuring the depreciation, property taxes, insurance and mortgage interest, the percentage of square footage is the preferred method.

For the other expenses, particularly utilities, it's pretty much an even split between square footage or number of occupants.  Nothing to do with number of rooms. With the number of occupants method, if you have 5 occupants living in the property and 2 of them are renters, then you can allocate 20% of the utilities to each occupant. With two occupants being renters, that would mean 40% of your utilities are deductible on the SCH E. There are some caveats though.

- If you have only one landline telephone in the property, you are not allowed to claim any portion of the phone bill on SCH E.  Whereas if you have two landlines and one of them is for the renter, then the cost of the 2nd landline is 100% deductible as a rental expense.

For all other utilities, they must actually be shared with the tenant. For example, if you have cable TV in the property and there is a physical cable drop in the tenant's room, then the apportioned amount of the bill is deductible on SCH E. But if there is no cable drop in the tenant's room, then it's not considered a shared utility and none of it is deductible.

So it is perfectly possible and okay to use say, percentage of square footage for depreciation, property taxes, insurance and mortgage interest, while using the number of occupants method for everything else in the expenses section. So depreciation may be figured at 10% of the property value based on square footage, while utilities may be figured at percentage of occupants who are renters, and that could work out to 40%.

Keep in mind that once you select a method for depreciation, you can never change that method without jumping through hoops of fire over a lava pit, and lots of paperwork. But you can change your method for all the others year to year with no headaches.

Overall, I highly recommend square footage for the depreciation, taxes, insurance, and interest, as that will most likely result in lower depreciation. Remember, depreciation is not a permanent deduction. So I myself prefer to keep depreciation as low as I legally can.

RichardMMMM
Level 3

How do I put personal use days?

Thank you! This clears up a lot.

 

Using the area method to calculate, How do I account for shared space in a rental?

 

The rental agreement gives the tenant full access to common areas which is where most of the depreciating assets are (refrigerator, etc)

 

So lets supposed the full unit is 820.

Do I subtract the unavailable part to include common areas? (Full sqft-my room, 820-250= 570 )

OR

Do I include just their part? (Their room plus their bathroom, 240)

 

Again that's

Full area 820

Tenant area 240

Landlord area (unavailable to tenant) 250

 

RichardMMMM
Level 3

How do I put personal use days?

Overall, I highly recommend square footage for the depreciation, taxes, insurance, and interest, as that will most likely result in lower depreciation. Remember, depreciation is not a permanent deduction. So I myself prefer to keep depreciation as low as I legally can.

 

Thank you for this, by the way. This is very helpful to know.

RichardMMMM
Level 3

How do I put personal use days?

On that vein, can I expense the following items as something other than a depreciating asset? My understanding is that they do not fit into any expense category and should be depreciated. Please let me know if I am wrong. The expense categories I see are maintenance, supplies, and repairs.

 

Mattress and bed frame: Purchased for the rental ONLY

Refrigerator (shared)

New living room furniture (shared)

New dining furniture (shared)

Lighting/sconces (shared space)

Television (shared space)

 

Thanks!!!

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