I'm confused by the personal days vs rental days. I lived in my home Jan 1- July 7, 2019. During May, June & July I lived in the house while getting it ready for rental (painting, new floors, carbon monoxide detectors etc.) On July 8 , 2019 I moved out and we put up ads to rent the house. Someone rented in from Sept. 1 through the end of the year. They continue to rent it out today.
Which days are considered personal days?
For purposes of the question in TurboTax, enter ZERO personal days. It is asking the number of personal days AFTER it became a rental.
You will need to manually prorate the expenses for the year.
It seems apparent to me that you are a first time landlord. Below is information that provides clarification the program does not. Two points:
- Days rented: *every* *single* *day* after you converted it to a rental. Generally if you select "the whole year" I think the program will figure things from the "in service" date just fine. But I"m not 100% on that.
- Days of personal use: ZERO. It's asking how many days you lived in the property as your *primary* residence, 2nd home, vacation home or any other "personal pleasure" use after you converted it to a rental. If you stayed in the house for the *PRIMARY* purpose of preparing it for the first renter after the rest of the family moved out, then you have *ZERO DAYS* of personal pleasure use of any type.
If you do things correctly and have the program do the splits for you, the program *WILL* split the mortgage interest for you. In some situations it will not split the property taxes and you will have to do that manually.
Also, will *NOT* split the property insurance. The insurance has to be pro-rated by you manually for the SCH E. Property insurance for the period of time it was not classified as a rental is not deductible anywhere on your tax return.
Rental Property Dates & Numbers That Matter.
Date of Conversion - If this was your primary residence or 2nd home before, then this date is the day AFTER you moved out.
In Service Date - This is the date a renter "could" have moved in. Usually, this date is the day you put the FOR RENT sign in the front yard. So if you advertised before you moved out, your in service date is still the day after you moved out, if the property was "in fact" move-in ready one day after you moved out.
Number of days Rented - the day count for this starts from the first day a renter "could" have moved in. That should be your "in service" date if you were asked for that. Vacant periods between renters count also PROVIDED you did not live in the house for one single day during said period of vacancy.
Days of Personal Use - This number will be a big fat ZERO. Read the screen. It's asking for the number of days you lived in the property AFTER you converted it to a rental. I seriously doubt (though it is possible) that you lived in the house (or space, if renting a part of your home) as your primary residence or 2nd home, after you converted it to a rental.
Business Use Percentage. 100%. I'll put that in words so there's no doubt I didn't make a typo here. One Hundred Percent. After you converted this property or space to rental use, it was one hundred percent business use. What you used it for prior to the date of conversion doesn't count.
RENTAL PROPERTY ASSETS, MAINTENANCE/CLEANING/REPAIRS DEFINED
Property improvements are expenses you incur that add value to the property. Expenses for this are entered in the Assets/Depreciation section and depreciated over time. Property improvements can be done at any time after your initial purchase of the property. It does not matter if it was your residence or a rental at the time of the improvement. It still adds value to the property.
To be classified as a property improvement, two criteria must be met:
1) The improvement must become "a material part of" the property. For example, remodeling the bathroom, new cabinets or appliances in the kitchen. New carpet. Replacing that old Central Air unit.
2) The improvement must add "real" value to the property. In other words, when the property is appraised by a qualified, certified, licensed property appraiser, he will appraise it at a higher value, than he would have without the improvements.
Cleaning & Maintenance
Those expenses incurred to maintain the rental property and it's assets in the useable condition the property and/or asset was designed and intended for. Routine cleaning and maintenance expenses are only deductible if they are incurred while the property is classified as a rental. Cleaning and maintenance expenses incurred in the process of preparing the property for rent for that very first time are not deductible.
Those expenses incurred to return the property or it's assets to the same useable condition they were in, prior to the event that caused the property or asset to be unusable. Repair expenses incurred are only deductible if incurred while the property is classified as a rental. Repair costs incurred in the process of preparing the property for rent for that very first time are not deductible.
Additional clarifications: Painting a room does not qualify as a property improvement. While the paint does become “a material part of” the property, from the perspective of a property appraiser, it doesn’t add “real value” to the property.
However, when you do something like convert the garage into a 3rd bedroom for example, making a 2 bedroom house into a 3 bedroom house adds “real value”. Of course, when you convert the garage to a bedroom, you’re going to paint it. But you will include the cost of painting as a part of the property improvement – not an expense separate from it.