That is a more complicated question than it first appears to be.
The first issue I would point out is that the basis of the rental needs to be the lower of your cost or Fair Market Value. Therefore I am assuming the cost segregation is based on the original basis you used for the rental.
What I am not sure about is, does the study then adjust the basis of each item to reflect the depreciation which was taken in 2021 and 2022?
Second, Pub 527 talks about separating assets added to the rental, but not separating the rental itself other than land and improvements. I'm not sure the IRS would allow you to separate the rental into individual assets, such as a stove and refrigerator when the rental was active for two years and those assets were part of the original rental.
I can see why someone would want to do this since Depreciation Recapture could be shifted to Capital gains potentially.
In order to report this is TurboTax, you would need to tell the program the rental was converted to personal use on 01/01/2023 to end the continuation of depreciation, and then re-enter it as another rental, but you would need to enter all the new basis amounts for each asset. You would need to report that it was rented since 2021 and make sure the total prior depreciation is exactly what you previously claimed (which it won't be if the assets have different property classes)
THEREFORE
You could claim the excess depreciation as an expense and file Form 3115 for that change in accounting
OR amend 2021 and 2022 and separate the assets for those years as well.
@rossleavitt
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