taxes for rental conversion

Forum|Forum|3 years ago
January 19, 2023
3 replies
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If I converted the rental on, for example, 12/20, how do I handle the mortgage interest and property tax? Is any portion counted as rental expense or should I put everything as primary residence? Thank you.

Anonymous_

Level 15

Enter the property in the Rental Properties and Royalties section of the program.

The interest and taxes will be prorated, along with any other rental expenses incurred during the period of rental use, including half a month's depreciation.

MarilynG

Level 15

Yes, mortgage interest and property tax is considered a rental expense from the date of conversion.

If you rented in all of 2021, you can Amend your 2021 return to report these rental expenses. Once you enter your Rental Info, TurboTax guides you through reporting mortgage interest and property tax as rental expenses.

Unless you also lived in the home for part of the year, these expenses would all to go Rental. If so, you would need to 'allocate' a % to primary residence. TurboTax will help you with this, if it applies.

Click this link for details on Entering Rental Income and Expenses.

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user17750693608

Level 8

The p[roperty becomes a rental property when it is ready and available to be rented. If that date was the 20th, then a small percentage of what you paid can be allocated to that useage.

You place property in service in a rental activity when it is ready and available for a specific use in that activity. Even if you aren’t using the property, it is in service when it is ready and available for its specific use.

You will start with the lower of the fair market value vs the adjusted basis for converted property.

When a personal residence is converted to business use (or for use in the production of income), its starting point for basis for depreciation is the lower of

(1) the adjusted basis on the date of the conversion or

(2) the property's FMV at the time of the conversion.