Why is the depreciation expense on a rental property converted to primary home mid-year of 2017 not being added to the rental property's total expenses?

[rsusvilla]

The Assets/Depreciation section shows that TurboTax has calculated a depreciation of $6,779.  However, the rental expense summary shows the depreciation as zero.  I also printed Schedule E and it shows depreciation as zero.

[Carl]

Sounds to me like you may have mis-understood what the program is asking for, since you converted it to personal use mid-year. The program does lack clarify in that respect. So here's the clarity.
THe business use percentage of the property on 100%. (one hundred percent). It's asking for the percentage of time you used the property for business *before* you converted it to personal use. So it's 100% business use. This is assuming that you did not live in the property for one single day as your primary residence, 2nd home or vacation home *before* you converted it to personal use.
Number of days rented will be counted from Jan 1st, to the date of one day before you converted it to personal use, or if your took it "out of service" before that date, then it will be the days counting from Jan 1st, to the day *before* you took the property out of service. Since you converted it to personal use, the property is considered out of service on the date the last renter moved out. Any expenses incurred after that date are not deductible rental expenses. This is true even if your conversion date, is a date after the out-of-service date.
Pay attention to the screens that ask you for your mortgage interest. Depending on what you selected at the start of the rental section, you will be told to enter the total amount of interest paid and if so, the program will pro-rate it for you. Otherwise, if you elected to do the splits yourself manually, the screen will inform you that you have to manually figure it.
In the "rental expenses" section, you only claim those expenses incurred before you took the property out of service. One thing to pay attention to is the property insurance and real estate taxes. You "might" have to pro-rate those manually, or the program will do it for you depending on what you selected at the start of the rental section. I do know that in the desktop version of the program, the program will not pro-rate the property taxes and insurance for you, no matter what you selected at the start of the rental section. I would expect that to be true for the online version of TurboTax also.

[TaxGuyBill]

So to emphasize one of Carl's comments above:  If it was 100% rental and converted to 100% personal use, enter ZERO personal days.  That should fix the problem.

[rsusvilla]

That was it!  I set the personal days to ZERO and that took care of the problem.  I had to manually pro-rate the mortgage interest and the property taxes so that they are only based on the number of days that the property was rented.  Thank you very much Carl and TaxGuyBill!  You guys rock!!!

[Carl]

I can't speak for the online version, but with the desktop version it "un" clearly states the facts that I clarify above. Some people "get it", but most of the time they don't.

[rsusvilla]

Yes Carl, I was using the online version.  I was confused by what to put in Personal Days.  I thought I had to put the number of days that the property was 100% personal use, so that the total of the Days Rented and the Personal Days summed up to 365.  That was my error.  Personal Days should be ZERO if the property was 100% rental, then converted to 100% personal use.  Thanks again for your help!

[TaxGuyBill · Accepted solution]

I'm glad that we figured out that entering zero personal days solved the problem not allowing all of the expenses, such as depreciation.

[Carl]

One issue I have is the 'splitting" of information. For example, when converting to personal use, on that screen where you select the option to indicate you did that, when you select that option you are then presented with the following information:
 "If you moved into your rental and made it your personal residence in 2017, you need to divide up your expenses..."
In my opinion, the word "rental" needs to be removed from that sentence. Then for better clarify it should read:
 "If you moved into this property to make it your primary residence, or if you made it your 2nd home or vacation property, then you can only claim expenses that were incurred prior to converting the property to personal use. You will also need to work through the assets/depreciation section of the program to show the conversion of all assets to personal use."

Then on the next screen you are asked "Was this property rented for all of 2017?"  This question has to be answered NO. When you select no, you are asked for number of days rented, and number of days personal use.
The number of days rented count starts from Jan 1st to the day the last renter moved out. It does not matter if a renter was physically in the property or not because of vacant periods between two renters.
Then for number of days of personal use, there's a "note" under that which reads:
"The number of days during the year you lived in this rental property after converting it from a rental do not count as personal use days and should not be entered as personal use during the year"
Now to me, the above is quite clear. But I would like to see the words "converting it from a rental" changed to "converting it to personal use". In my mind (as twisted as my mind is) that seems to provide better clarity, as the way it reads now can be incorrectly interpreted because a double-negative is incorrectly insinuated in the minds of some.