How do you calculate depreciation for: a principal residence that rents itself out for the summer, then returns to principal residence for remainder of year?

[md42]

The residence was used exclusively as a rental unit since 2004 and generated those many years of depreciation. But we moved into the house last Oct 2016 as a principal residence.  In May 2017, we went away for almost six months and rented it out as a vacation rental, then returned in Oct to take up principal residence again.   How do I calculate depreciation for the summer months for the vacation rental status?  

As an aside, in last year's TT, we took the assets out of service as of Oct 2016, not realizing we would rent it again this year.   We also have unrealized carryover losses from its passive loss status since 2004.   TT keeps linking our 2017 activities to those unrealized losses.  

[DianeW · Accepted solution]

The passive losses should be linked to this rental property/activity. They can be used until the income allows them to be used or until you sell the property, if ever.

The assets, including appliances, the adjusted basis of the home, etc will all retain their adjusted basis and depreciation will continue except that now it is for only part of the year when it is rented vs the personal use time periods.  It does get a little complicated in TurboTax with mixed use.

The situations have changed so all the deductions and depreciation should be calculated correctly if you make the correct choices on the "Do any of these situations apply to this rental?" Keep in mind that the expenses will be prorated according to the days of rental use.  You do have to answer "No" it was not rented all year and then the number of days at fair rental value. 

This will also calculate the correct depreciation if the assets are still listed, if not you must enter them exactly as they were on your 2016 tax return with basis, and accumulated depreciation to the date of personal conversion in 2016.

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