topic How do I indicate conversion of a rental property to primary residence, if I purchased the property, rented it, and converted it in the same year? in Investors & landlords

How do I indicate conversion of a rental property to primary residence, if I purchased the property, rented it, and converted it in the same year?

chriswa1 — Mon, 09 Mar 2026 04:48:25 GMT

I purchased a rental property in March 2021 and continued to rent it to the existing tenant. In December 2021 the tenant left and I moved into the house as my primary residence. Where do I indicate the date on which the home became my primary residence in TT?

Here is the timeline:
• Date acquired

Re: How do I indicate conversion of a rental property to primary residence, if I purchased the pr...

DanaB27 — Sun, 27 Feb 2022 02:05:08 GMT

You will be able to enter the date on which the home became your primary residence when you are working on the asset entry of the house:

Login to your TurboTax Account
Click on "Search" on the top right and type “rentals”
Click on “Jump to rentals”
Continue until the “Tell us about your situation this year” screen and select “Converted home to rental or rental to home”
On the “How was house converted?” screen select “From rental to primary residence”
Continue through the questions
When you are working on your assets (house) on the “Tell Us More About This Rental Asset” screen select “The item was sold, retired, stolen,… converted to personal use,….” and you can enter the day you converted the property to a personal residence.

Re: How do I indicate conversion of a rental property to primary residence, if I purchased the property, rented it, and converted it in the same year?

Carl — Sun, 27 Feb 2022 03:04:34 GMT

Take note that since it was rented for less than a year, it's considered a "vacation rental" and not a full fledged rental property. Your personal use day count starts on the date you moved in at the latest, and those personal use days will reduce your deductible rental expenses allowed on the SCH E. Additionally, since you rented for less than a year, you are not required to take any depreciation on the property, and I highly recommend that you don't.

Re: How do I indicate conversion of a rental property to primary residence, if I purchased the property, rented it, and converted it in the same year?

Anonymous_ — Sun, 27 Feb 2022 16:00:04 GMT

A couple of notes:

Merely because the property is rented for less than a year, does not make it a "vacation rental". The IRS, in fact, does not have an actual definition of "vacation rental".

The scenario set forth indicate that rental period was less than a year and that the property was converted to personal use for the last month of the tax year. As such, expenses not directly related to rental use (during the rental period) have to be prorated.

Further, depreciation is not a requirement; it is "allowed" per Section 167. Depreciation on property held for business use or for the production of income is recaptured based upon depreciation deductions allowed or allowable.

Re: How do I indicate conversion of a rental property to primary residence, if I purchased the pr...

chriswa1 — Wed, 02 Mar 2022 04:00:48 GMT

The instructions from DanaB27 are very helpful, and this is what I would like to do. However, in step #7, I never see a “Tell Us More About This Rental Asset” screen. Instead, TT gives me a "Tell us more about your purchase of The-Rental" screen and then asks a series of questions about cost basis. I assume that's because I purchased the rental property in 2021. I would like very much to indicate that the asset was converted to personal use... but I don't see how to get TT to show a screen where I can provide that info.

Re: How do I indicate conversion of a rental property to primary residence, if I purchased the pr...

Carl — Wed, 02 Mar 2022 04:55:22 GMT

Let's start from the beginning. Delete the property entirely in the Rental & Royalty summary screen. Then start adding it anew.

On the Screen "Do any of these situations apply to this property?" select 2 of the items on that screen.

- 2021 was the first year I rented this property

- I converted this property from a rental to personal use in 2021

Click Continue

On the screen "Was this property rented for all of 2021?" select NO.

- For days rented, the day count starts from the closing date of your purchase, and ends one day after the renter moved out. That date is also your date of conversion, which you will enter later.

- For days of personal use, enter the digit ZERO.

Click Continue

Continue working things through to complete the property profile section and enter your purchase/acqusition information.

- Where it asks you to enter your "Original purchase price (including land)" enter your contracted sales price.

- Available date is the closing date of your purchase

- Purchase date is the closing date of your purchase

Click Continue and keep working it through.

- Property tax valuse are "NOT" what you paid for the property. Those are determined by your county property tax assessor. You should be able to find those on line on our property tax appraiser's website. They will be "LOWER" than what you paid for the property. Usually 30% lower, give or take.

That will be the final thing you deal with in the property profile section.

Work through rental income and enter the rental income recevied.

Work through rental expenses and enter only those expenses incurred "BEFORE" you converted it to personal use. The only expenses I would expect you to be entering here are insurance, real estate taxes and Mortgage interest. You could have other expenses. But depending on how long it was after you purchased it, that the last tenant vacated, you very will may not.

After expenses, edit the Assets/Depreciation section and if offered, elect to go straight to the summary.

On the "Your property assets" screen you will see the property itself listed there. Click the Edit button to work this through and change things.

About 4 screens in you're at the "Tell us more about this rental asset" screen. Select the following:

- I purchased this asset new

- This item was sold, retired, stolen, destoyed, disposed of, converted to personal use, traded in, or given away.

- For "date you sold/retired from use" enter the date of one day after the last tenant moved out.

- Select "YES I HAVE ALWAYS USED THIS ITEM 100% FOR BUSINESS" (seems wrong I know. But it is not wrong)

Click Continue

- On the "Special Handling Requred?" screen, read the information on that screen to understand why I am telling you to click the YES button. Then click the YES button. (If you click NO then you will be "FORCED" to enter sales information. You did not sell the property. So click YES.)

Now finish working through the rest of the rental section, and that does it. The property and it's assets (of which you only have one asset) are converted to personal use. You're done.

Re: How do I indicate conversion of a rental property to primary residence, if I purchased the pr...

chriswa1 — Sat, 05 Mar 2022 04:53:14 GMT

Thank you @Carl ! The key was to check "This item was sold, retired, stolen, destroyed, disposed of, converted to personal use, traded in, or given away." I had missed the bit in bold the first time around.

I see this is also what @DanaB27 suggested but I had missed that key clause.

Re: How do I indicate conversion of a rental property to primary residence, if I purchased the pr...

Wade020 — Sun, 06 Mar 2022 14:02:48 GMT

Is the process simular when I convert my previous residence to an Air BnB?

Re: How do I indicate conversion of a rental property to primary residence, if I purchased the pr...

chriswa1 — Sun, 06 Mar 2022 15:42:34 GMT

What's described here is the opposite--converting a rental to primary residence.

Re: How do I indicate conversion of a rental property to primary residence, if I purchased the pr...

RaifH — Sun, 06 Mar 2022 16:36:13 GMT

Converting your home to a rental property is done in this manner:

Select Start/Revisit next to Federal > Wages & Income > Rentals, Royalties, and Farm > Rental Properties and Royalties (Sch E)
Select Yes
Select Rental property
Enter the information on the next two screens then under Tell us about your situation this year, select Converted home to rental or rental to home
Select From primary residence to rental
Carefully read the menu prompts from here on out
When you get to the assets section, make sure to enter the date you first placed the rental in service to calculate the depreciation on the property correctly. Also, enter the proper portions of the cost to the land and the building, as land is not depreciated for tax purposes.

@Wage020

Re: How do I indicate conversion of a rental property to primary residence, if I purchased the pr...

jrfrerichs — Tue, 28 Feb 2023 12:40:32 GMT

How is this accomplished in TurboTax Home & Business? I don't recall a similar set of questions.

Re: How do I indicate conversion of a rental property to primary residence, if I purchased the pr...

PattiF — Tue, 28 Feb 2023 13:54:58 GMT

Here are the instructions from Expert KrisD15 to convert from Rental to Personal use in TurboTax Home and Business. As she mentioned, the entry is very tedious.

Your Rental "Property Profile" should be completed or carried over from your last years return.

Go through this interview

First is information, such as address

Continue

Select Type, such as Single family

Continue

Select CONVERTED (the second option) and check the box for "I converted this property from a rental to personal use in 2022."

Continue

Select "No, this property was not rented all year"

Enter number of days rented and 0 Personal use

Continue

Yes, I owned 100%

Continue

Select yes or no to being an Active participant

Continue

Did you pay anyone $600?

Continue

Enter my rental info myself

Continue

None of the above

Continue

Next, enter the income you received.

Move to Assests/Depreciation

Start or Update

Yes, I want to go to my asset summary

Continue

Click Edit next to the rental

Select Rental Real Estate Property

Continue

Select Residential Rental real Estate

Continue

Enter the cost and date purchased

Continue

select BOTH "I purchased this asset" AND "The item was sold, retired, stolen, destroyed, disposed of, converted to personal use..."

Enter the end date

Continue

Accept the depreciation and continue

Special handling Required?

YES

Depreciation for 2022 is listed on screen

Continue

Done

Answer the remaining interview questions

Screen shows Profit or loss

In your forms, you should have Schedule E showing the loss (if 2022 Depreciation was more than rental income)

and 4562 Depreciation and Amortization Report, but no 4797

Keep the depreciation report with your tax file and use to recapture depreciation when you do sell.

To see more of the discussion about this subject please see this link.

@jrfrerichs

Re: How do I indicate conversion of a rental property to primary residence, if I purchased the pr...

DonHu — Sun, 17 Sep 2023 23:24:26 GMT

How do I get to correct location in Turbo Tax that is loaded onto your computer. The method suggested doesn't work for this version to get to area for telling Turbo Tax that you converted to personal property

Re: How do I indicate conversion of a rental property to primary residence, if I purchased the pr...

DonHu — Sun, 17 Sep 2023 23:27:32 GMT

How about if I had a setup in basis due to a spouse passing and want to start depreciating property using new step up value. The old value was totally depreciated years ago.

Re: How do I indicate conversion of a rental property to primary residence, if I purchased the pr...

itutuia — Tue, 05 Dec 2023 18:02:19 GMT

I followed the instructions and "Jump to rentals", is not an option. Also, converting rental to private residence or any variation of this does not provide any information on how to file if you are now using your rental home as your primary residence. HELP!!!!!!!

Re: How do I indicate conversion of a rental property to primary residence, if I purchased the pr...

Carl — Thu, 07 Dec 2023 02:49:39 GMT

@itutuia Get the the rental section and start working through the rental "AS IF" nothing has changed. Enter any/all rental income received during the year. Then enter all rental expenses incurred during the year that were incurred "BEFORE" you converted the property to personal use.
Then, in the Assets/Depreciation section you must work through each individual asset listed, one at a time. You'll have a screen for "I stopped using this asset in 2023". Select YES. WHen/if prompted, enter the date that is one day after the last renter moved out.
You'll have another screen titled "Special Handling Required?" On this screen you "MUST" select YES. If you do not select YES, then you will be *forced* to enter sales information. You did not sell the property. You're just converting it to personal use.

If you claimed "ANY" vehicle use on this rental property, then you must also show disposition of that vehicle - even if the business use was less than 100%. Just work through the vehicle asset section, indicated you "stopped using this vehicle in 2023", enter a date of one day after the last renter moved out, then press on.Also, if you get the "Special Handling Required?" screen on the vehicle, then same as above, you must select "YES".

Once you have done this for each and every asset listed in the Assets/Depreciation section, finish working through the rental section in it's entirety, and you're done.

Re: How do I indicate conversion of a rental property to primary residence, if I purchased the property, rented it, and converted it in the same year?

carlRcraw — Thu, 13 Mar 2025 13:13:18 GMT

"Additionally, since you rented for less than a year, you are not required to take any depreciation on the property, and I highly recommend that you don't."

Hi Carl. I would like a little more information on this, please. I am mixed-use first year filing. I don't intend to rent the property again. Depreciation seems to be overkill for me, but I didn't think I had an option. Can you explain why you "highly recommend that [I] don't"? Thanks.

Re: How do I indicate conversion of a rental property to primary residence, if I purchased the pr...

RobertB4444 — Thu, 13 Mar 2025 21:36:45 GMT

Even though it may be 20 years from now before you sell your personal residence the depreciation that was taken on the property when it was a rental is required to be re-captured and taxed at a normal rate. Since this is your primary residence again all of the gain on the sale of the home will be non-taxable (at least the first half million). The only thing that you'll have to pay tax on will be the depreciation recapture. @Carl is trying to save you some money.

@carlRcraw

Re: How do I indicate conversion of a rental property to primary residence, if I purchased the pr...

carlRcraw — Wed, 19 Mar 2025 14:12:31 GMT

Thank you. I quess I'm dense, but Carl said he highly recommended that I NOT depreciate the property on my taxes, therefore I would not have any recapture when I sold the property. It's a vacation house mixed-use property, so I may sell it in five years, maybe longer. Any clarification would be welcome.

Re: How do I indicate conversion of a rental property to primary residence, if I purchased the pr...

PatriciaV — Thu, 20 Mar 2025 18:55:36 GMT

Yes, RobertB4444 is agreeing with Carl that you should not depreciate the property. In the long run, you will save money when you sell the rental by not having to repay the depreciation recapture.