I rented out 2/3 of my home for some years in the past and claimed depreciation and expenses on it. I then converted to home to personal use and I lived in the home for a couple years. Last year, I rented out the home again, but this time I rented out the entire home. Few questions:Will I have to enter this as a new home in Turbotax or should I continue the old rental somehowFor depreciation, @Anonymous_ mentioned before that I will need to re-calculate the fair market value of the home or the adjusted basis and deduct any depreciation I have already claimed when it was a rental before. Does this reset the depreciation period of the home to be the full 27 1/2 years based on this new value?Does moving from a 2/3 rented home where I only used 2/3 of depreciation to now 100% renting home affect how the deprecation will work with this new rental?How would I go about doing this in the turbotax product? Will it prompt me with the right question/autofill (e.g how much depreciation was used before) or will I need to enter some things manually?@Carl11_2 @Anonymous_ I've gotten answers about this depreciation from each of you in previous discussions, so definitely value your input if you have any thoughts on this scenario. I did not find other discussions about rental -> personal use -> and then back to rental.

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vinodr777

Question

Converting an old rental that is currently personal use back to rental

Forum|Forum|2 years ago
November 3, 2023
1 reply
0 views

I rented out 2/3 of my home for some years in the past and claimed depreciation and expenses on it.

I then converted to home to personal use and I lived in the home for a couple years.

Last year, I rented out the home again, but this time I rented out the entire home.

Few questions:

Will I have to enter this as a new home in Turbotax or should I continue the old rental somehow
For depreciation, @Anonymous_ mentioned before that I will need to re-calculate the fair market value of the home or the adjusted basis and deduct any depreciation I have already claimed when it was a rental before. Does this reset the depreciation period of the home to be the full 27 1/2 years based on this new value?
Does moving from a 2/3 rented home where I only used 2/3 of depreciation to now 100% renting home affect how the deprecation will work with this new rental?
How would I go about doing this in the turbotax product? Will it prompt me with the right question/autofill (e.g how much depreciation was used before) or will I need to enter some things manually?

@Carl11_2 @Anonymous_ I've gotten answers about this depreciation from each of you in previous discussions, so definitely value your input if you have any thoughts on this scenario. I did not find other discussions about rental -> personal use -> and then back to rental.

Anonymous_

Employee

@vinodr777

TurboTax, frankly, will not be much help here; you will have to enter the property again after taking it out of service.

You do need to calculate your adjusted basis (which would include prior depreciation) and then use the lesser of that value or the fair market value on the date of conversion (or re-conversion) to rental use as your new basis for depreciation.

The recovery period would also reset to 27.5 years.

Carl11_2

Employee

Will I have to enter this as a new home in Turbotax or should I continue the old rental somehow

You'll enter it as a completely new property.

For depreciation, @tagteam mentioned before that I will need to re-calculate the fair market value of the home or the adjusted basis and deduct any depreciation I have already claimed when it was a rental before. Does this reset the depreciation period of the home to be the full 27 1/2 years based on this new value

That's a more complicated way of saying what is really simple. Take the cost basis you used when you originally rented the home (or part of it) and subtract the depreciation already taken. That will be your new cost basis. Note that what you enter in the COST box will be that adjusted cost basis. What you enter in the COST OF LAND box will be "exactly" the same as you used before since land is not a depreciable asset. The program (not you) will do the math of subtracting the land value from the cost to arrive at your new cost basis for the structure. Then the program (not you) will depreciate the new structure value accordingly.

Depreciation will start over from year one, for the next 27.5 years.
Finally, note that it is up to "you" to keep track of the prior depreciation taken when it was 2/3 rental. The program has no way of knowing that amount, or of keeping track of it. This will matter in the future when you sell the property, because you are required to recapture and pay taxes on all recaptured depreciation in the tax year you sell the property. I suggest you write this information down and file it will your original purchase papers on the property that you received when you closed on the original purchase of said property. That way, you'll have it handy in the future when needed.

Anonymous_

Employee

@Carl11_2 wrote:
That's a more complicated way of saying what is really simple. Take the cost basis you used when you originally rented the home (or part of it) and subtract the depreciation already taken. That will be your new cost basis.

Of course, the above-quoted "less complicated way" does not take into consideration whether the adjusted basis is higher or lower than the fair market value on the date of conversion to rental use.

The new basis for depreciation would be the lesser of the two figures and the cost of any improvements made would be added to the adjusted basis while accumulated depreciation would be subtracted from the adjusted basis.