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February 10, 2023
Question

Conversion from rental property to primary residence

  • February 10, 2023
  • 1 reply
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Using TT Premiere:

I converted my home from a rental property to my primary residence mid-year. As I understand it, I need to split mortgage interest, real estate tax, and insurance premiums between schedule A and schedule E. Can I assume the same for home owners association fees? Also, how can I verify TT has properly stopped the depreciation?

 

Thanks

    1 reply

    Carl11_2
    Employee
    February 10, 2023

    As I understand it, I need to split mortgage interest, real estate tax, and insurance premiums between schedule A and schedule E.

    While you do split mortgage interest and RE taxes, be aware that the property insurance is not a deductible expense on SCH A for the period of time it was your primary residence. So you'll pro-rate the insurance for the time it was a rental, and enter that pro-rated amount on the SCH E.

    Other rental expenses are 100% deductible, for those expenses incurred up to the date it was converted for personal use. So there's really no pro-rating there.

    Can I assume the same for home owners association fees?

    Your HOA fees are 100% deductible up to the date of conversion to personal use. SO if your fee was say, $50/mo and you converted on July 1, only 6 months worth ($300) are 100% deductible on SCH E.

    Also, how can I verify TT has properly stopped the depreciation?

    After working through the asset, the last screen gives you a summary which shows you the depreciation to be claimed for the current 2022 tax year. It should be less than the full year of depreciation taken last year. Understand that since residential rental real estate uses the mid-month convention, depreciation stops on the 15th of whatever month you convert, regardless of what day of that month you converted.

    If you have other assets in the property not classified as Residential Rental Real Estate, then the convention for those asset will be different. But still, the depreciation for the current 2022 tax year should be less than the full year of depreciation taken on that asset last year.

     

    RC82Author
    February 10, 2023

    Thank you. That's what I needed to know.