sale of rental property

[aem1337]

I've read many posts on this topic but I'm still not sure how to classify my rental property for tax year 2020 (rental vs personal use)? I owned the property since 2010, started renting it in 2012, and sold it in 2020. The property was rented until 8/2019; in September I did some renovations and then decided to put it on the market for sale rather than rent again. I ended up taking it off the market in December 2019 and it eventually sold in March 2020.

I left it as a “rental property” for the sake of my taxes for all of 2019 and added the cost of bath Reno to the basis. I'm not sure if that is correct but I am hoping to keep it as a rental property for the purposes of 2020 taxes. Would that be the correct thing to do?

Thank you for any advice you can give.

-A

[MarilynG1]

Yes, you can keep the Rental Property in your 2020 return, in order to report the Sale in March 2020.

You can go back and Amend your 2019 return and report your Rental Property as 'converted to personal use' in August 2019.

TurboTax will figure the proper depreciation for you for 2019, and you can still claim your Rental Expenses.

However, the Bath Renovation would be added to the Basis of the Rental Property when reporting the Sale on your 2020 return, since it was done after the property was 'converted to personal use' (no longer available for rent). 

Click this link for more info on How to Amend a 2019 Return.

 This link gives instructions on How to Report Sale of Rental Property. 

[aem1337]

@MarilynG1 Thank you for your response, but I'm a little confused. 

"Yes, you can keep the Rental Property in your 2020 return, in order to report the Sale in March 2020."

Are you saying I would "convert it to personal use" as of August 2019, and then convert it back to a rental property in 2020 to mark the sale? I would presume if it was converted to personal use in 2019, it would then be a business asset for 2020, not a rental property. 

If i never lived in it in 2019 or used it for personal use, would it still be "converted to personal use"?

[PattiF]

Yes, you can keep the rental house as a rental property until it was sold in 2020.  It was not a personal use property.

You were correct  in added the renovations in 2019 to the basis.

[Critter-3]

You don't convert it to personal at all ... leave the 2019 return alone.  On the 2020 return say it had 1 day of rental use just to keep the property alive in the program.  That is the easiest way to deal with the sale on the tax return since you did sell it in march.  

[aem1337]

Thank you for your responses. 

In looking back at my 2019 taxes in Turbo Tax, I'm confused about how I classified the bathroom renovation. It seems as though it was added as a depreciating asset; but even when I go through the software and change my answers to make the "asset" an improvement,  it still gets added as a depreciating a asset.    Would I still add this to the basis when documenting the sale in 2020? 

[PattiF]

The bathroom renovation would generally be considered an improvement and be a depreciating asset. Since you no longer own the house, you are unable to take the yearly depreciation on your taxes. All of the depreciation for the uncaptured depreciation will be added to your return in the year of the sale. If you were depreciating the bathroom renovations, the amount would already be added to your basis. Since you entered the bathroom renovations in the 2019 tax return for the rental, all the information will be included with the rental property already.