SCH E fair rental days - no personal use

[localhero]

Everything I see about this involves personal use but what if there is no personal use.  I have two duplexes (4 units) that I rent out and the only time they aren't actively rented is between tenants.  If a tenant is leaving March 31st, I advertise it as available April 1st so they're always rented or advertised for rent.  Does "Fair Rental Days" include those vacant times between tenants or am I supposed to subtract those days?

Thanks!

[M-MTax]

Fair rental days are a term of art but provided your rental units are ready and available for rent every day of the tax year there is no personal use (i.e., you have zero personal use days) and you can deduct all ordinary and necessary rental expenses.

[localhero]

Thank you.  That's how I thought it works but the TT expert I'm working with is telling me that I need to subtract all days it wasn't occupied with a tenant.  She had me going through leases to figure out how many days between tenants.  I told her I've never been asked to do that before (I've previously used CPA's for my taxes) but she insisted...

[M-MTax]

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@localhero wrote:

....the TT expert I'm working with is telling me that I need to subtract all days it wasn't occupied...

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Yeah, that's wrong.

[AmeliesUncle]

While this is one of the rare times I disagree with M-MTax (I think you enter the actual number of days occupied,), with no personal days, it does NOT matter.  Both will have the same result (as M-MTax said, all expenses are deductible).

[M-MTax]

I don't think we disagree (in essence) at all; it's just that, as you stated, it makes no difference one way or the other.

The reason I stated it in the manner in which I did was because there are some people out there who think because there are less than 365 rental days the expenses should be prorated even if there is zero personal use and the rental is available for rent for the entire tax year.

[localhero]

Sorry but now I'm just re-confused.  I've had rentals for at least 25 years and no accountant has ever before asked me to go through leases to figure out just how many days a property was occupied.  Every CPA has just put 365 days as the "Fair Rental Days" number.  Is that the correct number with my scenario as I described in my original question?  

[M-MTax]

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@localhero wrote:

.......how many days a property was occupied.  Every CPA has just put 365 days....

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As we have been saying here, it really makes no difference since you have no personal use.

In TurboTax, for example, you could answer "Yes" to the question as to whether the property was rented all year. It would make no difference whether you did that or answered "No" and then entered, for example, 200 days at fair rental value and 0 days of personal use.

Technically, as @AmeliesUncle indicated, you should enter the exact number of days actually rented. The key here is personal use days (of which there are none).

Just as a sidebar (and homily), I, personally, always just enter "365" for the number of days rented since the one property is always available for rent. Again, technically probably not correct but it really makes no difference tax-wise since I never have any personal use days.

[localhero]

Ok, I understand that "technically" it's supposed to reflect only the days it was actually occupied but that with no personal days, it doesn't matter... any idea as to why that's even on the form then?  Wouldn't it make more sense to just ask how many personal use days?

Maybe it's not fair to expect tax forms to make sense but it's interesting that all of my previous CPA's and you choose to just put 365 whether accurate or not if there's no personal days.  For me, it meant taking the time to go through leases and figuring out occupied vs non-occupied days.  I would just be inclined to put 365 as well.

[AmeliesUncle]

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@localhero wrote:

 any idea as to why that's even on the form then?  Wouldn't it make more sense to just ask how many personal use days?

Maybe it's not fair to expect tax forms to make sense but it's interesting that all of my previous CPA's and you choose to just put 365 whether accurate or not if there's no personal days.  For me, it meant taking the time to go through leases and figuring out occupied vs non-occupied days.  I would just be inclined to put 365 as well.

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The exact number of rental days DOES matter *IF* there are also personal days.

I admit, like M-MTax, I just enter 365 as well (even though it technically is not correct, and assuming there are no personal days).  Because it doesn't make any difference, it isn't worth figuring out.

[M-MTax]

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@localhero wrote:

.....with no personal days, it doesn't matter... any idea as to why that's even on the form then? 

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Because although Congress wrote the Tax Code, the IRS develops the tax forms and, honestly, they're not too bright. I believe that the inclusion of personal days (only once on the Schedule E) is primarily due to those who have Vacation/Short-Term Rental property (look at the form) and who typically also use that property as their vacation homes as well as for rental use.

I further believe they didn't know how to segregate that from the scenario where long-term rentals sit unoccupied for any period of time. It would really clarify matters if they just asked for the number of personal use days and the number of days the property was ready and available for rent (the latter of which is the actual law). Just my opinion.

[localhero]

Thanks to both of you for the answers!  I can feel confident that my confusion is based on illogical tax forms.