If I delete a second home that was previously rented as short term rentals but not in 2019 do I lose any previous years data and can I recreate it as a rental property in 2020 if I rent it?
Yes. You absolutely lose it all.
If you did not rent or attempt to rent out the property in 2018, then you should have converted it to personal use on your 2017 tax return. That would prevent it from being imported into your 2018 return.
If you did attempt to rent it in 2018, were unsucessful and gave up, then you should have converted it to personal use on your 2018 tax return.
The conversion to personal use stops the depreication, which is "exactly" what you want if you did not rent it out or attemptto rent it out. If anything, the conversion would occur on the date you stopped trying to rent it out, at the latest.
Just deleting the SCH E from your 2019 return without showing it's disposition (such as converting it back to personal use) has the probability of resulting in a paper "audit my mail" at some time in the future. It will definitely cause you painful headaches for reporting the sale on the tax return for the tax year you sell the property.
If you did not convert the property back to personal use in a prior year, that's why it was imported into the 2019 tax return. At a minimum, you should show a convertion back to personal use on your 2019 tax return with a conversion date of 1/1/2019.
Now if you're saying "but I did convert it to personal use on my 2017/18 tax return!", yet it was still imported into the next year's tax return, then either you told the program you had rental income/expenses to report, or you did not "completely and correctly" report the conversion in it's entirety.
As far as the IRS is concerned, you still have active rental property until the below two things are done. (only these two things in your specific case, since you did not sell or dispose of the property.)
- You show the disposition of all assets listed in the assets/depreciation section. In your case, that would be "converted to personal use". YOu have to work through each listed asset one at a time to do this.
- If you claimed "any" vehicle expenses on this rental in "any" prior tax year, then you have to show the disposition of that vehicle (even if less than 100% business use) in the "Vehicle Expenses" section. Again, that would be "removed for personal use" for you.
SO if you are of the belief that you completed everything on the 2017 return and it was imported into the 2018 return, then you didn't complete everything.
If you are of the belief that you completed everything on the 2018 return, yet it was still imported to the 2019 tax return, then you didn't complete everything.
Just deleting the rental property without showing it's disposition *WILL* catch up to you sooner or later. So you need to ensure you do (or have done) this right.
