Mixed use rental converted to full-time rental

[E_M_H]

I own a condo and have lived in it as my home and rented out a room in it to a roommate for the past several years, making it a mixed use rental (owner-occupied rental).

In 2022, I kept this arrangement for January through October, but then I got married and moved out. We decided to keep the condo as a rental property and continue renting to my former roommate full-time for the months of November and December.

I'm not finding examples for my specific situation of converting from a mixed use rental to a full-time rental. 

Should I answer that I rent a part of where I live (since that was true the majority of the year, 10 out of 12 months), or should my answer now be no to that, since it is no longer my home?

How would fair market days and personal use days be considered in this instance, and how should I deduct expenses and account for depreciation?

I do consider the rent I charged both while sharing the space and now after moving out as fair market value.

[AmyC]

Both. To begin with, keep it "as is" for the first 10 months, same as always.

The only thing that makes sense to me is to say you disposed of the asset when you moved out, converted it - not sold.

Then add the entire unit as a new rental property. The basis would be decreased by the depreciation already taken. You would have no personal use days for the item placed in service in November.

You are correct, there is no good guidance for going mixed to full rental. Keep good notes on what you decide to do with your tax folder. You will need to keep all records related to that rental until at least 3 years after sold. 

See also: IRS Pub 527 for Rental Property

[E_M_H]

Thanks. I didn't previously take any depreciation on it while it was my primary residence, so I'm starting fresh with listing it as a depreciable asset in November. 

In that case, should I list the full purchase price as the basis (since that is the lower value between purchase price and fair market value now) and then determine the business percentage (line 6 on the Asset Entry Worksheet that asks for the percentage of business use) as 61 days out of 365 (Nov & Dec), so 16%?

[KrisD15]

Landlords are always required to "recapture depreciation" whether taken or not. 

If you reported the rental when you were only renting out a room in TurboTax, the program should have computed the depreciation. 

If you didn't take depreciation, you didn't take depreciation. But if you did, whatever depreciation was claimed over the years would be subtracted from your basis. 

It would be difficult to correct at this point without filing amended returns or filing Form 3115 with your Tax Year 2022 return. 

Since you are now renting out and depreciating the entire unit, you will still recapture depreciation when you ultimately sell the property. 

Yes, use the lower value as the basis.

No, when you end the room rental and start the unit rental, treat the unit rental as brand new. Although it was only rented November and December, it was 100% business during that time if you had moved out.