When you convert the rental property to personal use (investment property ,includes second home, or primary residence), your passive loss carryovers will stay suspended with the property but cannot be used until you sell the property a fully taxable transaction to an unrelated party. Here's how you enter the conversion:
When in your tax return, under Wages & Income, scroll down to Rental Properties and click on Update
- Continue through the next 2 screens and on the 3rd screen click on Edit next to your property
- Click on Update next to Property Profile, continue through the next 2 screens
- On the screen Do Any of These Situations Apply to This Property? check the box by I converted this property from a rental to personal use in 2017.
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TurboTax will lead through a series of questions to gather the information. When you finish the Property Profile section, skip down to the Asset section and click on Update
- Continue through the screens, answering questions until you reach the screen Tell Us More About This Rental Asset, check the box The item was sold, retired, stolen.... and enter the date retired
- Just finish any remaining screen, click Done to get out of Rental Section
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