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Rental converted to personal use, now converting back to a rental - depreciation calc??

I had a residential rental, purchased in 2015 that I moved into in August 2023.  On my 2023 return, I depreciated about 8/12ths of the annual depreciation amount.

 

In 2024, I converted the unit back to a rental in October.  So it seems I should get about 2 months depreciation (or maybe 1 1/2 months if using mid month convention), but I cannot figure out how to get turbo tax to calculate this.

 

Under the property info, i checked the box for "converted from personal use to rental, and put 61 days rented at fair rental price and left personal use days blank.

 

The individual asset is listed at 100% business use.

 

I cannot figure out why is is giving me so much depreciation expense.

 

In addition to the building asset, there are some land improvements, 15 year straight line.  Not sure what to do with these.

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1 Best answer

Accepted Solutions
DianeW777
Employee Tax Expert

Rental converted to personal use, now converting back to a rental - depreciation calc??

Let's break this down, TurboTax will be able to handle this with some manual action on your part. The property was a rental until August, 2023, at which time you converted it to personal use. Since you converted to personal use, it would seem the property did not carryforward to 2024.

 

This situation can be handled by following the information below using your 2023 tax return.

 

Enter each asset back to your 2024 tax return with original date of purchase, and the new date of rental (October, 2024).  This will provide the correct depreciation for 2024 (each asset).  It will be very important for you to keep track of all depreciation you have already used prior to 2024, so that you have what you need when you actually sell the property. 

 

There may not be a place to enter the prior depreciation in 2024.  However this will retain the correct depreciation for 2024 and going forward.

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5 Replies
DianeW777
Employee Tax Expert

Rental converted to personal use, now converting back to a rental - depreciation calc??

Let's break this down, TurboTax will be able to handle this with some manual action on your part. The property was a rental until August, 2023, at which time you converted it to personal use. Since you converted to personal use, it would seem the property did not carryforward to 2024.

 

This situation can be handled by following the information below using your 2023 tax return.

 

Enter each asset back to your 2024 tax return with original date of purchase, and the new date of rental (October, 2024).  This will provide the correct depreciation for 2024 (each asset).  It will be very important for you to keep track of all depreciation you have already used prior to 2024, so that you have what you need when you actually sell the property. 

 

There may not be a place to enter the prior depreciation in 2024.  However this will retain the correct depreciation for 2024 and going forward.

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Rental converted to personal use, now converting back to a rental - depreciation calc??

Actually, I did not delete it.  I just put in the number of days it was rented and I think I used the percentage of business use on each asset to get it to calculate the depreciation.

 

In any case the assets are still in the return with the proper amount of accumulated depreciation.  

 

I don't think I can use the business use percent for 2024 since it is less than 50%.  

 

Do you think that maybe I should just over ride the depreciation deduction?  There is no AMT involved.

RobertB4444
Employee Tax Expert

Rental converted to personal use, now converting back to a rental - depreciation calc??

You can override the depreciation deduction.  Just maintain the records on how you arrived at the adjusted depreciation.

 

@ldh312 

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Rental converted to personal use, now converting back to a rental - depreciation calc??

Thank you for the input.  

 

I have no idea why, but if I adjust the business use percentage to 58.5%, I get pretty close to the right answer.  So I am going with that.

Rental converted to personal use, now converting back to a rental - depreciation calc??

If it was converted to personal use (and especially for more than one year), you re-start depreciation using the new "placed in service date" (October 2024) and the ADJUSTED Basis of the property (usually purchase price, plus improvement, minus depreciation).

 

However, whenever you eventually sell the property, you will need to know the prior depreciation amounts and report it in a different way in TurboTax.

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