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kjgregory83
New Member

I converted my rental property to personal use this year. What is the correct way to deduct the mortgage interest and taxes for the time it was used for personal use?

I entered form 1098 into both the rental property section and the mortgage interest section. I think that I need to apply a percentage to the part in the mortgage interest deduction section, but I'm not sure. I think that it may have already applied a percentage to the other portion, but again not sure.
1 Reply
MichaelDC
New Member

I converted my rental property to personal use this year. What is the correct way to deduct the mortgage interest and taxes for the time it was used for personal use?

Try to enter your property tax and mortgage interest in the Schedule E for the Rental and remove it from the Deductions & Credits section.

TurboTax will then automatically calculate how much of this taxes and interest can be deducted for your rental. It will also add any remaining interest to Schedule A. The total of the two should equal your 1098.

For example, when TurboTax asks Was This Property Rented for All of 2016? and you answer No, you'll be prompted to enter days of rental use and days of personal use. As you continue in the rental section, you'll enter the mortgage interest and property tax for the home. Later, when you work on your personal Deductions & Credits, TurboTax will remind you not to enter property taxes or mortgage interest that have already been included with your rental property. (See the attached screenshot below. Click to enlarge.)

Also, in the Do Any of these Situations Apply screen, check "I converted this property from rental to personal use in 2016". (See the attached screenshot below. Click to enlarge.)

Next year, there is nothing you need to do if you haven't received income for the year.

If and when you sell it, then at that point, the status of the house will be determined either personal or rental/investment property. The IRS would then tax the gain/loss accordingly.

So there's nothing to do to convert it, you'll just simply no longer file the Schedule E's with your return since there is no rental income. If you depreciated the property, then you'll want to keep a record of that total amount, as it will be needed to adjust the cost basis of the house for taxes, if/when you do sell.







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