How to calculate Rental days vs Personal use days?
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Level 1

How to calculate Rental days vs Personal use days?

I converted my rental property to primary residence in 2019, but before I made the decision to move in, it stayed vacant for three months.

My renter moved out on July 1, but I moved into the home only on Sep 2. In that timeframe, I continued to look for prospective tenants and was undecided about whether I was going to convert it into my primary residence.

For tax purposes, how should I calculate fair rental days and personal use days?

5 Replies
Level 15

How to calculate Rental days vs Personal use days?

Your date of conversion back to personal use is the day after the last renter moved out. Doesn't matter that you were undecided for three months on what to do. Your days rented is every single day from Jan 1 to the day the renter moved out. Your personal use days is ZERO. Your business use percentage is ONE HUNDRED PERCENT.

For personal use days and business use percentage, the program is asking you for the days you lived in it for "any" personal use *while the property was classified as a rental*. That will be ZERO days.

Level 1

How to calculate Rental days vs Personal use days?

Thank you @Carl.

A follow up question - how about my rental expenses? Can I include only those incurred when the renter was living in the house? How about expenses I incurred when the property was vacant and not yet converted to primary residence? (I was still looking for tenants)

Also while allocating mortgage interest between rental expense and interest deduction, what date should I consider? The date the renter moved out OR the date that I moved into the house? 

Level 11

How to calculate Rental days vs Personal use days?


@ng10 wrote:

In that timeframe, I continued to look for prospective tenants and was undecided about whether I was going to convert it into my primary residence.


I disagree with Carl's viewpoint of when it was converted to personal use.  If it was available for rent and you were seeking tenants, it is still treated as a rental.  When that stopped, it was converted to personal use.  So that is also the date that you use for calculating what is a rental expense and what is a personal expense.

Level 15

How to calculate Rental days vs Personal use days?

I disagree with Carl's viewpoint of when it was converted to personal use.

That's fine. But if audited, it's not me you have to prove it to. When dealing with the IRS there are three golden rules.

1) You are guilty until proven innocent.

2) The burden of proof is on the accused (that would be the tax filer) and not the accuser.

3) If it's not it writing, then it did not occur.

 

 

Level 11

How to calculate Rental days vs Personal use days?

Of course you need some sort of documentation in case of an audit.  That is true with EVERYTHING on the tax return; you need documentation in case the IRS questions it.  If the OP was seeking tenants, there should be some sort of documentation of that (listings on Craigslist or whatever other means they were seeking tenants).

 

But the fact is it WAS a rental as long it was available for rent and seeking new tenants.  So whenever that ended, that is the date it was converted to personal use and that date is what is used to determine rental expenses and personal expenses.

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