How do I caclulate part year depreciation prior to sale?

[davey5]

Should I take a 2019 tax depreciation on a rental house I sell in April 2019, that same year?  If I depreciate it for 4 months and then recapture that same amount of depreciation, it makes no sense to me.  The house was not available for rental during that time. 

[Lisa995]

It just became a rental in 2019, or you've had it as a rental for years prior to that?      

If this is an ongoing rental, when you enter the date of sale in the 2019 tax return, the program will do all the depreciation deduction/recapture for you, you don't choose whether to take it or not.

If it just became a rental in 2019 and then you sold it in the same year, youre right the depreciation will just wash itself out.

[Carl]

"The house was not available for rental during that time.  "

When reporting the sale in TurboTax 2019 (which is not available yet) if you did not live in the house as your primary residence, 2nd home or vacation home for one single day in 2019, then you will *NOT* select the option to indicate that you converted the property to personal use.  But you *WILL* indicate that you sold the property in 2019.

You also *MUST* indicate that you rented the property for one day in 2019. (It's a program flaw that can not be fixed because programming limitations makie it impossible to fix)

Then for the rental income section, you *MUST* enter an actual digit to report the rental income, even if that digit is a zero.

In the rental expenses section you will enter absolutely nothing. That section can be left blank and you don't have to enter anything.

Next, in the "sale of assets/depreciation" section will be listed all of your rental assets which, at an absolute minimum will be the property itself. There, you will indicate that the property was converted to personal use on 1/1/2019. That will stop depreciation on that date.

To stop depreciation before 1/1/2019, you would have to amend your 2018 tax return and convert the property to personal use. Then, you would *NOT* be reporting this sale in the SCH E section of the program on your 2019 taxes. So just do it the way I'm saying and save yourself what can otherwise be a real PITA.

Then in the same section (sale of assets/depreciation) you will report your sale of the property on whatever date you close on the sale in 2019.

You must report the sale of each asset individually, and your total sale price of all assets must be equal to your total sale price of the property. So if you have more than the property itself listed in the assets section and need guidance on how to divvy up your sales price correcty, please let me know.

[davey5]

If I were to make my sale part of a1031 exchange whereby I indicate the like property for rental I intend to purchase within 45 days, I imagine the procedure would be slightly different.  Is this correct? Thanks

[davey5]

Thanks Carl great answer to my first post.

[Lisa995]

A 1031 exchange needs to be set up prior to sale, all monies from the sale would be keep in escrow managed by a third party for the replacement property.....is this sale that occurred part of a 1031 exchange?  A 1031 exchange can be complex to report on a tax return.

[Carl]

Basically, *you* can't do a 1031 exchange. That has to be pre-arranged with a 3rd party (preferably one that "has a clue" and knows what they're doing) prior to the sale/exchange. As far as the classificiation of e property goes, it will (and must) remain classified as a rental. If you convert it to personal use before the 1031 exchange and then exchange it for other rental property, you'll find yourself in a never ending nightmare with the IRS from which you'll never awaken.
Now when it comes to 1031 exchanges, I don't answer posts with questions about that, because I know just enough about 1031 exchanges to be down right dangerous. Basically, the only "fact" I know about such a transaction is that it must be completed by a licensed 3rd party that has no personal interest in the properties being exchanged.
For a 1031 exchange, how the depreciation is handled can differ, depending on a number of things that I don't know enough about.