How do I separate the rental percentage for 4 months, and the full (100%) rental spare for the additional 8 months? Would I need to enter or show two separate rental incomes? I am assuming 4 months *exactly* with the dates I"m using. You can adjust as necessary. Basically, you will convert "everything" to personal use with a conversion date of Apr 30, 2020. Then you will enter an entirely new rental property that is 100% business use with an in service date of May 1, 2020. So work through the existing rental and about 3-4 screens in select the option for "I converted this property from a rental to personal use" Select anything else on that screen that applies too. Then continue working through the rental income and expenses section "as if" nothing has changed. You will enter the rental income received only up to the date you converted it to personal use, and only the rental expenses incurred up to the date you converted it to personal use. Next, work through the assets/depreciation section. You must work through each individually listed asst one at a time and perform the following. - On the first screen write down the cost basis along with the total amount of prior year's depreciation taken on that asset. - On the screen that asks if you stopped using this asset in 2020, answer YES. - On the screen that asks "Special Handling Required?" click YES. (If you click NO you will be *forced* to enter sales information. You did not sell this property. So click YES.) - On the final screen write down the 4 months of depreciation that is being taken for 2020. Add this 2020 depreciation to the prior year's depreciation taken on this asset and write down the total. You *will* need this number, along with the cost of the asset. Note that you must do the above for each individual asset listed in the assets/depreciation section. Once you've finished the assets/depreciation section continue working it through until you have completed that specific rental property and you're on the "Rental & Royalty Summary" screen.   Now click the button for "Add Another Rental or Royalty" and start working it through. Take note of the following: - Your "in service" or "conversion date" will be one day after you converted things to personal use. So in my example your date of converting it back to a rental has to be May 1, 2020 or after. - You will only report rental income received after you converted it back to a rental. - You will only claim expenses incurred after you converted it back to a rental. - As you enter the assets anew (with 100% business use this time) you must reduce the cost basis on each asset by the depreciation already taken on that asset in the past. For the property itself you'll have two boxes to deal with. One call COST and the other COST OF LAND.  The amount in the COST box must be reduced by the amount of depreciation taken on the property already. The amount in the COST OF LAND box does not get reduced. For this "new" rental property, depreciation starts over from year one with the structure being depreciated over the next 27.5 years based on the adjusted cost basis (adjusted to account for the prior depreciation already taken while it was only partially rented.)   If you need further assistance I"m happy to help. Just remember, the more details you can provide about your specific situation and setup, the more specific my responses can be to your specific situation. - ... View more

I assume the property was still classified as a rental in 2020. Reporting the Sale of Rental Property If you qualify for the "lived in 2 of last 5 years" capital gains exclusion, then when prompted you WILL indicate that this sale DOES INCLUDE the sale of your main home. For AD MIL personnel who don't qualify because of PCS orders, select this option anyway, because you "MIGHT" qualify for at last a partial exclusion. Start working through Rental & Royalty Income (SCH E) "AS IF" you did not sell the property. One of the screens near the start will have a selection on it for "I sold or otherwise disposed of this property in  2020". Select it. After you select the "I sold or otherwise disposed of this property in 2020" you continue working it through "as if" you still own it. When you come to the summary screen you will enter all of your rental income and expenses, even if it's zero. Then you MUST work through the "Sale of Property/Depreciation" section. You must work through each individual asset one at a time to report its disposition (in your case, all your rental assets were sold). Understand that if more than the property itself is listed in your assets list, then you need to allocate your sales price across all of your assets.  You will only allocate the structure sales price; you will NOT allocate the land sales price, since the land is not a depreciable asset.  Then if you sold this rental at a gain, you must show a gain on all assets, even if that gain is $1 on some assets. Likewise, if you sold at a loss then you must show a loss on all assets, even if that loss is $1 on some assets. Basically, when working through an asset you select the option for "I stopped using this asset in 2020" and go from there. Note that you MUST do this for EACH AND EVERY asset listed. When you finish working through everything listed in the assets section, if you ever at any time you owned this rental you claimed vehicle expenses, then you must also work through the vehicle section and show the disposition of the vehicle. Most likely, your vehicle disposition will be "removed for personal use", as I seriously doubt you sold your vehicle as a part of this rental sale. ... View more

1. When does that house turn from being a rental unit back to my primary residence - for stopping of depreciation to allocation of property taxes, insurance expenses, etc.? One day after the last tenant moved out, or the date you made the decision to not rent it out - whichever date is last.   2. How much of the restoration of the house to tenantable conditions can be expensed? Only those expenses incurred up to the date you converted it back to personal use. For any property improvements made after the last tenant moved out, you will not enter those anywhere on your 2020 tax return. The cost of property improvements will not come into play until one of three things happens in your life. 1) You convert the property back to a rental 2) You sell the property 3) You die.   ... View more

Because it's a property improvement to the structure itself, you have to add it to the cost basis and depreciate it over 27.5 years. So you'll add it in the assets/depreciation section with an in service date of when the improvement was completed, or when the property was placed in service - which ever date is *last*.   ... View more

Anything and everything concerning residential rental real estate that you own gets reported under the Personal Income tab in the Business Items section. Sub-section under that called Rental & Royalty Income (SCH E). Rental Property Dates & Numbers That Matter. Date of Conversion - If this was your primary residence or 2 nd home before, then this date is the day AFTER you moved out, or the date you decided to lease the property – whichever is later. In Service Date - This is the date a renter "could" have moved in. Usually, this date is the day you put the FOR RENT sign in the front yard. Number of days Rented - the day count for this starts from the first day a renter "could" have moved in. That should be your "in service" date if you were asked for that. Vacant periods between renters count also PROVIDED you did not live in the house for one single day for any type of personal pleasure use during said period of vacancy. Days of Personal Use - This number will be a big fat ZERO. Read the screen. It's asking for the number of days you lived in the property AFTER you converted it to a rental. I seriously doubt (though it is possible) that you lived in the house (or space, if renting a part of your home) as your primary residence, 2nd home, or any other personal use reasons after you converted it to a rental. Business Use Percentage. 100%. I'll put that in words so there's no doubt I didn't make a typo here. One Hundred Percent. After you converted this property or space to rental use, it was one hundred percent business use. What you used it for prior to the date of conversion doesn't count. RENTAL PROPERTY ASSETS, MAINTENANCE/CLEANING/REPAIRS DEFINED Property Improvement. Property improvements are expenses you incur that Improve, restore, or otherwise “better” the property. Basically, they retain or add value to the property. Betterments: Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property.  An example of a pre-existing condition or defect in this context would be something such as foundation repair (slab jacking) or some other, hidden and costly, anomaly. Restoration: Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. Adaptation: Expenses that may be for adaptation include expenses for altering your property to a use that isn’t consistent with the intended ordinary use of your property when you began renting the property. Adding a wheelchair ramp would be an example.   Expenses for these types of costs are entered in the Assets/Depreciation section and depreciated over time. Property improvements can be done at any time after your initial purchase of the property. It does not matter if it was your residence or a rental at the time of the improvement. It still adds value to the property. To be classified as a property improvement, two criteria need to be met: 1) The improvement must become "a material part of" the property. For example, remodeling the bathroom, new cabinets or appliances in the kitchen. New carpet. Replacing that old Central Air unit. 2) The improvement must retain or add "real" value to the property. In other words, when the property is appraised by a qualified, certified, licensed property appraiser, he will appraise it at a higher value, than he would have without the improvements. There are rules that allow you to just flat-out expense and deduct some property improvements instead of capitalizing and depreciating them, if the total cost of the improvement was less than $2,500. It’s referred to as “safe harbor di-minimis” But depending on the specific situation, this may or may not be beneficial. Just be aware that not every property improvement that cost less than $2,500 qualifies for this. If this interest you, the rules can get complex. So a good place to start reading is on the IRS website at https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations. The stuff on di-minimis starts about one page down. Cleaning & Maintenance Those expenses incurred to maintain the rental property and it's assets in the useable condition the property and/or asset was designed and intended for. Routine cleaning and maintenance expenses are only deductible if they are incurred while the property is classified as a rental. Cleaning and maintenance expenses incurred in the process of preparing the property for rent are not deductible. Repair Those expenses incurred to return the property or it's assets to the same useable condition they were in, prior to the event that caused the property or asset to be unusable. Repair expenses incurred are only deductible if incurred while the property is classified as a rental. Repair costs incurred in the process of preparing the property for rent are not deductible. Additional clarifications: Painting a room does not qualify as a property improvement. While the paint does become “a material part of” the property, from the perspective of a property appraiser, it doesn’t add “real value” to the property. However, when you do something like convert the garage into a 3 rd bedroom for example, making a  2 bedroom house into a 3 bedroom house adds “real value”. Of course, when you convert the garage to a bedroom, you’re going to paint it. But you will include the cost of painting as a part of the property improvement – not an expense separate from it. ... View more

Rental expenses are claimed in the tax year they are paid. It does not matter in what tax year the work was actually done.   ... View more

What you pay for residentail rental real estate is not deductible. The cost is capitalized and depreciated over 27.5 years. Start in the Rental & Royalty Income (SCH E) section of the program and work it through. Make sure you read the small print on every single screen before you enter data or make selections. Otherwise, I can guarantee you will make mistakes that will cost dearly in the future. Perfection in that first year of dealing wtih rental property is not an option. It's an absolute must. Even the tiniest of mistakes will grow exponentially over time. THen when you catch the error years down the road, the cost of fixing it will be high. Rental Property Dates & Numbers That Matter. Date of Conversion - If this was your primary residence or 2 nd home before, then this date is the day AFTER you moved out, or the date you decided to lease the property – whichever is later. In Service Date - This is the date a renter "could" have moved in. Usually, this date is the day you put the FOR RENT sign in the front yard. Number of days Rented - the day count for this starts from the first day a renter "could" have moved in. That should be your "in service" date if you were asked for that. Vacant periods between renters count also PROVIDED you did not live in the house for one single day for any type of personal pleasure use during said period of vacancy. Days of Personal Use - This number will be a big fat ZERO. Read the screen. It's asking for the number of days you lived in the property AFTER you converted it to a rental. I seriously doubt (though it is possible) that you lived in the house (or space, if renting a part of your home) as your primary residence, 2nd home, or any other personal use reasons after you converted it to a rental. Business Use Percentage. 100%. I'll put that in words so there's no doubt I didn't make a typo here. One Hundred Percent. After you converted this property or space to rental use, it was one hundred percent business use. What you used it for prior to the date of conversion doesn't count. ... View more

Rental Property Dates & Numbers That Matter. Date of Conversion - If this was your primary residence or 2 nd home before, then this date is the day AFTER you moved out, or the date you decided to lease the property – whichever is later. In Service Date - This is the date a renter "could" have moved in. Usually, this date is the day you put the FOR RENT sign in the front yard. Number of days Rented - the day count for this starts from the first day a renter "could" have moved in. That should be your "in service" date if you were asked for that. Vacant periods between renters count also PROVIDED you did not live in the house for one single day for any type of personal pleasure use during said period of vacancy. Days of Personal Use - This number will be a big fat ZERO. Read the screen. It's asking for the number of days you lived in the property AFTER you converted it to a rental. I seriously doubt (though it is possible) that you lived in the house (or space, if renting a part of your home) as your primary residence, 2nd home, or any other personal use reasons after you converted it to a rental. Business Use Percentage. 100%. I'll put that in words so there's no doubt I didn't make a typo here. One Hundred Percent. After you converted this property or space to rental use, it was one hundred percent business use. What you used it for prior to the date of conversion doesn't count. ... View more

1. The program is going to use the *lower* of what you paid for the house, or it's FMV at the time you placed it in service. I have no doubt that what you paid for the house when you purchased it, is the lower price. So putting the same price as what you paid for it is fine. 2. When entering the property asset initially, the program asks for the value of any improvements. (Just stated that to make sure we're on the same page.) I do not recommend you add improvement values here, because the program does not do the math right (and it never has). Here's an example of how it does it wrong. The program will ask you for your tax values from your latest tax bill. Lets say your latest tax bill values the land at $30K and the structure on that land at $70K.  That means 30% of what you originally paid for the house was for the land, and the remaining 70% was for the structure. This is based on your *current* tax bill. So if you actually paid $250K for the property when you originally purchased it, 30% of that is $75K and is what the program will allocate to the land. The remaining $175K is allocated to the structure and is what get depreciated over the next 27.5 years. Now, when the program asks if you have any improvements, lets pretend you have $50K of property improvements to the structure. Maybe you put a new roof on the house shortly after you purchased it, and then later remodeled the kitchen. The way the program is going to handle it is to establish a new cost basis of $300K (the $250K you originally paid, plus the $50K of property improvements) then 30% of $300K is $90,000 that gets allocated to the land with the remaining $210K allocated to the structure. That's wrong. Based on the tax bill percentages and your *original* purchase price, your land value remains at $75K. Then the property improvements (the entire $50K) gets added to the structure value giving you a total of $225K for the structure. It's that $225K that gets depreciated over time. So tell the program that you do "NOT" have any property improvements. Then when you get to the screen with the COST box and the COST OF LAND box on it, it will show $75K for the land and $250K for total cost. Add your $50K of improvements to the total cost. Then the COST box will read $300K and the COST OF LAND box will remain unchanged at $75K. Now the program will depreciate the correct amount of $225K over the next 27.5 years. 3. Why is anything being prorated? For starters, any cleaning/maintenance/repair expenses incurred while preparing the property for rent for that very first time, are just flat out not deductible. Period. Expenses incurred between renters are fully deductible *PROVIDED* there is no personal use of the property during that period. Those vacant days are also counted as days rented too. Nothing gets prorated provided you did not live in the property as your primary residence, 2nd home, vacation home, or any other "personal pleasure" type of use *AFTER* you converted the property to a rental.  Therefore you will tell the program that the property was rented *the whole year*. Otherwise, if asked for days rented, the day count starts on the first day a renter "could" have moved in. As for days of personal use, it's asking for personal use days *AFTER* you converted it to a rental. So if you have no "personal pleasure" type of use after that date of conversion to a rental, the personal use days is ZERO. Anything higher than zero, and everything gets pro-rated, like it or not.   ... View more

Basically, you are required to depreciate rental property. You really don't have that much of a choice. You don't really need to list the property improvements as separate items, so long as everything was placed in service as a rental asset on same date. You can just add the cost of the property imporvement to the cost basis of the house. Makes it simpler and easier later. O course, you can list the improvements as separate assets if you want. but it's just more work on your part when you later sell or otherwise dispose of the property. Generally, you are required to depreciate anything that is utilized on a recurring basis for the production of income. ... View more