I usually rent my home out this year I moved into my home.I did not get any rent.

[Debif1959]

How do I take off declaring rent this year.

[DianeW777 · Accepted solution]

The information provided here will walk you through the process to remove this as a rental property from your return.  For 2021 you will still show some activity, then next year you can actually delete it, if it imports. 

When you are in the rental activity for 2021, you must select the 'Assets' section, then in each asset you must go to the screen titled 'Tell Us More About This Rental Asset'. 

1. Once you reach this screen for each asset, you must select 'This item was sold, retired, stolen, destroyed, disposed of, converted to personal use....' 
2. Next enter the date you stopped using the asset for rental purposes. And answer 'Yes' you always used this asset 100% of the time for business. (The percentage of use doesn't change until after conversion from rental to personal use.)
3. Select 'Yes' for Special Handling due to 'You converted the asset to 100% personal use'.

You may see some depreciation expense which will be the partial year amount.  For the period of the year it was available for rent, you may have some expenses which are allowed for that open period. 

Keep all of these records because you will need them when and if you sell this home. All depreciation will be recaptured at that time, regardless of how long you hold the property for personal use. The records are necessary until you completely dispose of or sell the property.

[Carl]

Start working through the rental property. About 2-3 screens in you'll have a selection for "I converted this property from a rental to personal use in 2021". Select that, then continue on.

On the screen "Was this property rented all year?" select NO. Under no circumstances and with no exceptions, do "NOT" select the option to indicate that you did not rent or attempt to rent the property. If you select that option, then the SCH E and all of your depreciation history will be "permanently" deleted.

Days rented must be at least 1 day. Days of personal use will be ZERO. Since you did not live in the property "BEFORE" you converted it to personal use, you have ZERO personal use days. Read the "note" on that screen.

Then finish working through this section entirely.

Next, work through the rental income section. Even if you did not receive any rental income, you have to enter a digit here; even if that digit is zero. Otherwise, the program will fail final checks and tell you that your rental stuff "needs review".

For rental expenses, enter only those expenses incurred while the property was still a rental. Expenses incurred after you converted the property to a rental are just flat out not deductible as a rental expenses.

Then you come to the Assets/Depreciation section. In this section you must work through each individual asset listed there, one at a time by clicking the EDIT button next to each listed item.

On the screen "Did you stop using this asset in 2021?" click YES.

On the next screen where it asks for date of sale or disposition, enter the date of conversion. This would be the day after the last renter moved out, or the date you stopped advertising the property for rent after that last renter moved out, or the date you began moving in. (This date should be the same for all listed assets in the assets/depreciation section.

On the "Special Handling Required?" screen, click YES. If you click NO, then you will be "forced" to enter sales information. Since you did not sell the property you must click YES.

Once you finish the above in the Assets/Depreciation section for all assets listed there, next will be the Vehicle Expenses section. You only need to work this section through if you ever at any time in any year claimed vehicle expenses for this rental. You'll work that through and show your disposition of the vehicle as "removed for personal use".

Basically, that does it.

Once you have finished your tax return in it's entirety, e-filed it and it's been accepted by the IRS, you will need to print out (or save as a PDF) everything.... and I mean "EVERYTHING". There is information about this rental property that you will "need" at some time in the future when one of three things happens in your life.

1. You convert the property back to a rental

2. You sell or otherwise dispose of the property in some other way.

3. You die.

Basically, when one of the above happens, at a minimum you'll need the two form 4562's that print in landscape format for that property, as well as the form 8582 that shows any passive loss limitations and carryovers. Depending on your specific situation there could be other forms that would be required too. So you will basically need to print out a complete copy of everything that includes all the calculation forms and worksheets, and keep it in a safe place since you will need it at some time in the future.

[dima7]

Hello, 

My situation is a little different and I want to make sure I do it right.

We sold our primary residence in November of 2020 and moved to the house which we were renting until then.  Somehow we didn't convert that rental property to primary residence on our 2020 tax return (only realized that just now, when working on our 2021 tax return).  First I was thinking about filing an amended return for 2020 in order to correct my mistake and "convert rental to primary residence", but then I tried to take care of that on my 2021 tax return by selecting "No, this property was not rented all 2021 year", then putting 0 zero into Days rented and 364 in Personal use during 2021 year.  I also checked the "I did not rent. attempt to rent, this property at all in 2021" check box.  And saw the warning that property will be deleted.  My question is this: should I delete that rental and keep all forms from my 2020 and 2021 tax returns and use them later when I decide to sell that property (let's imagine in 2 years to avoid paying taxes) or should I file amended tax return for 2020 year to properly "convert it to primary residence"?  Thank you

[Carl]

should I delete that rental and keep all forms from my 2020 and 2021 tax returns and use them later when I decide to sell that property (let's imagine in 2 years to avoid paying taxes) or should I file amended tax return for 2020 year to properly "convert it to primary residence"?

If you don't show a conversion to personal use and just delete it from your 2021 return, then that "could" have the potential to raise eyebrows if you don't show the SCH E on your 2021 tax return.

You should amend the 2020 return and show a conversion to personal use between at least one day after the last renter moved out, and the day you started moving in.

When done, there's three documents you'll need to print and keep from the amended 2020 return.

The form 4562 that prints in landscape format titled "Depreciation and Amortization Report"

The form 4562 that also prints in landscape, titled "Alternative Minimum Tax Depreciation Report"

The IRS Form 8582-Passive Activity Loss Limitations.

You will need those forms at sometime in the future when one of three things happens.

1) You convert the property back to a rental

2) You sell the property

3) You die.

When amending make absolutely certain you read the small print on all screens. Otherwise, you may not complete the conversion process entirely and correctly.

[dima7]

Thank you for a quick response!  Greatly appreciate your advise.

[Carl]

After you complete the amending process of the 2020 tax return, when you start your 2021 return make absolutely certain and with no doubts, that you import from the "amended" return. That's important.

[dima7]

Great point!  Thank you for all your help, much appreciated.