I disagree with @KrisD15 based on your statement, "The unit was not available for rent after the remodel. "
On your 2021 tax return you need to convert the property to personal use with a conversion date of 1 day after the last renter moved out. Doing this means 2021 will be the last tax year you will report anything concerning this property on SCH E.
Do not confuse property improvements (renovations) with other expenses. Any expenses incurred after the property is converted to personal use is not deductible on SCH E. (they "may" be deductible as sales expenses on your 2022 tax return, when you report the sale.)
Property improvements add to your cost basis in the property. But since this property was converted to personal use after the last renter moved out, none of your property improvements done between the time the last renter moved out and the date you closed on the sale of the property will be entered on SCH E at all.
Just convert the property to personal use. (details on doing that below.)
Once you have filed your tax return and it's been accepted by the IRS, you will need to print out 3 forms from your 2021 tax return, as you will need them in order to report the sale on your 2022 tax return next year.
- There will two form 4562's that both print in landscape format. One is titled "Depreciation and Amortization Report" and the other is "Alternative Minimum Tax Depreciation". Print them both.-
- IRS Form 8582-Passive Activity Loss Limitations. Print this form. If this form is not present in your completed, filed and accepted 2021 tax return, that just means you don't have any carry over losses. So if the form is not present, that's fine. You can't print what you don't have.
Also, keep all paperwork, receipts, invoices associated with your property improvements/renovations, as you will need that information to report the correct cost basis on your 2022 tax return when you report the sale.
File all forms with your property sales paperwork so you'll have it for reporting on your 2022 tax return next year.
For 2022, you will report this sale in the "Sale of Business Property" section. As you work it through you'll be asked for the total of all depreciation taken. You'll get that off the 4562's you printed.
You'll also be asked for any passive activity carry over losses. If you have any, you'll get that figure from the form 8582.
Now, the below covers how to convert the property to personal use on your 2021 tax return. It's important to do this, so as to stop depreciation the day after the last renter moved out.
Convert Rental Property to Personal Use
Start working through Rental & Royalty Income (SCH E) "AS IF" you did not sell the property. One of the screens near the start will have a selection on it for "I converted this property from a rental to personal use in 2021". Select it. After you select the "I converted this property from a rental to personal use in 2021" you continue working it through "as if" nothing changed When you come to the summary screen you will enter all of your rental income and expenses, even if it's zero. Note that you can only claim/deduct those valid rental expenses incurred up to the date of conversion to personal use.
Next, you MUST work through the "Assets/Depreciation" section. You must work through each individual asset one at a time to report its disposition (in your case, all your rental assets were converted to personal use).
Basically, when working through an asset you select the option for "I stopped using this asset in 2021"
On the next screen you enter a date of one day after the last renter moved out.
On the "Special Handling Required?" screen, read that screen to understand why I am telling you to click YES. Then click YES. If you click NO, then you will be forced to enter sales information. You did not sell this property in 2021. So click YES.
When you finish working through everything listed in the assets section, if you ever at any time you owned this rental you claimed vehicle expenses, then you must also work through the vehicle section and show the disposition of the vehicle. Most likely, your vehicle disposition will be "removed for personal use",
