I'm using turbotax self employed to do my 2022 federal and state return. We sold a vacation rental property in 2022. The property was held for 9 years and turbotax was used every year. All of the calculations of the basis values for home, land and improvements including yearly depreciation work out fine if I report zero personal use of the property in 2022. The capital gains determined by turbotax are exactly as I calculate manually. However, if I report even a few days of personal use in 2022, Turbotax reduces the basis values for each line item that was sold, even land that has been held for 9 years! The reduction in basis for each line item is approximately equal to the percentage of personal use in 2022. For example, for 7 days of personal use and 78 days of rental, the reduction of basis used to calculate capital gains on sale for each line item is to 92%. (This personal use is below the 10% limit). This has a huge effect on my tax bill. I understand that personal use will have an effect on 2022 depreciation values and 2022 rental expenses, but these major changes in basis values suggest to me that there may be a bug in the turbotax program. Has anyone seen this?
When you report personal use of a rental property, the business use percentage goes down. This will also lower your basis in the rental portion of any rental assets, but not the land (unless you included the land value in the total asset value). The net effect would be an increase in the gain on sale.