cost base for house converted to rental then sold 2024

When you convert a house from personal use to a rental property and then sell it, the cost basis for tax purposes is determined by the lesser of the fair market value (FMV) or the adjusted basis on the date of conversion

Here's how to calculate it:

1. Determine the Adjusted Basis: This is your original purchase price plus the cost of any improvements, minus any deductions like depreciation or casualty losses.
2. Determine the Fair Market Value (FMV): This is the price at which the property would sell on the open market on the date of conversion.
3. Choose the Lesser Value: The cost basis for depreciation purposes is the lesser of the adjusted basis or the FMV at the time of conversion

When you sell the property, your cost basis will be adjusted for any improvements made during the rental period and reduced by the depreciation claimed.

For more detailed information, you can refer to the TurboTax Help Article and the IRS Publication 551.