topic I took a rental property out of service on 1/1/17 (still own) do I need to file any forms for that property or do I just delete the property from my 2017 tax return? in Deductions & credits

I took a rental property out of service on 1/1/17 (still own) do I need to file any forms for that property or do I just delete the property from my 2017 tax return?

BusyLady26 — Tue, 04 Jun 2019 01:20:08 GMT

I own a rental property that we have rented out for many years. As of 1/01/17 we decided we will no longer be renting the property out. The property is vacant. Since we took it out of service do I need to file any tax forms for that property or do I simply delete it on my 2017 tax return?

If you did not rent the property at all in 2017, you can...

MarilynG — Wed, 18 Mar 2020 23:00:17 GMT

In the Rental section, edit your property in the Property Profile and Assets/Depreciation section to indicate that you 'converted to personal use' and the Date.

Save your last Form 4562, Depreciation Schedule for the Accumulated Depreciation amount, which you will need when you sell the property.

[Edited 03/18/2020 | 3:59 PM]

Re: I took a rental property out of service on 1/1/17 (still own) do I need to file any forms for that property or do I just delete the property from my 2017 tax return?

Hydrographer1 — Tue, 08 Dec 2020 18:07:42 GMT

I purchased an investment property in 2011 which was rented out through 2016 and then became my primary residence for the past 4 years. I would like to place the property back into service in 2021 with the idea of eventually doing a 1031 exchange for another property with the intent of it eventually becoming my primary residence. I'm not sure what steps to take regarding the future depreciation. Do I continue with the original depreciation schedule whereby for 2021 tax filing, the property will be year 6 of the 27.5 year depreciation schedule?

Re: I took a rental property out of service on 1/1/17 (still own) do I need to file any forms for that property or do I just delete the property from my 2017 tax return?

Critter-3 — Thu, 10 Dec 2020 01:34:40 GMT

Do I continue with the original depreciation schedule whereby for 2021 tax filing, the property will be year 6 of the 27.5 year depreciation schedule? *** corrected *** the depreciation starts again from day one

Re: I took a rental property out of service on 1/1/17 (still own) do I need to file any forms for that property or do I just delete the property from my 2017 tax return?

Hal_Al — Thu, 10 Dec 2020 02:10:11 GMT

Q. Do I continue with the original depreciation schedule whereby for 2021 tax filing, the property will be year 6 of the 27.5 year depreciation schedule?

A. I don't think so. But I'm not sure. But I do recall this question beings asked before in this forum. I think the first Conversion to personal use is treated as a disposition. The second time it is placed in service, you reduce the cost basis by the amount of depreciation previously claimed thus reducing the annual depreciation on the 2nd 27.5 year period.

But, that said, there may be an alternate election, available, to continue the old depreciation schedule (Edited: alternate election not allowed; see tagteam's comment below)

@Carl @Opus 17 @TaxGuyBill @TomD8 Any input? I'm going by memory.

Re: I took a rental property out of service on 1/1/17 (still own) do I need to file any forms for that property or do I just delete the property from my 2017 tax return?

Anonymous_ — Wed, 09 Dec 2020 19:35:32 GMT

Per §1.168(i)-4(c) the conversion to personal use is treated as a disposition, but no gain or loss is recognized at that time.

If the property is then later converted back to rental use, it is treated as having been placed in service for the first time on that date (prior depreciation needs to be tracked to determine the new basis for depreciation - the lesser of FMV on the date of conversion or adjusted basis).

Re: I took a rental property out of service on 1/1/17 (still own) do I need to file any forms for that property or do I just delete the property from my 2017 tax return?

Anonymous — Wed, 09 Dec 2020 20:40:10 GMT

you can not depreciate personal use property so depreciation should have stopped in 2017

Re: I took a rental property out of service on 1/1/17 (still own) do I need to file any forms for that property or do I just delete the property from my 2017 tax return?

Carl — Thu, 10 Dec 2020 01:17:12 GMT

there may be an alternate election,

TurboTax can't handle that. What you have to do when you place the property back in service, is treat it as a new rental. You reduce your cost basis on the structure only, by the amount of depreciation taken in prior years when it was classified as a rental. Then using that new cost basis you start depreciation over again for the next 27.5 years.

Re: I took a rental property out of service on 1/1/17 (still own) do I need to file any forms for that property or do I just delete the property from my 2017 tax return?

Anonymous_ — Thu, 10 Dec 2020 01:24:21 GMT

@Carl wrote:

there may be an alternate election,

TurboTax can't handle that.

That does not matter because an alternate election does not exist; conversion back to rental use entails starting a new depreciation schedule (over 27.5 years).

@Carl wrote:

.....using that new cost basis you start depreciation over again for the next 27.5 years.

In most cases that will be accurate but, technically, the lower of adjusted basis or FMV must be used.