In 2022, I lived in my house till Oct 31. Rented it out on Dec 1st. Should the Fair rented days be 31 & Personal use days be 304 for "Was ABC rented every single day"?
In 2022, I lived in my house till Oct 31. Rented it out on Dec 1st. Should the Fair rented days be 31 & Personal use days be 304 for "Was ABC rented every single day"?
Assuming the house was "in service" one day or more after you moved out, Your days rented is 31, days of personal use is ZERO, and yes, it was rented the entire year. The below information will help clarify this, and a few more things too.
Rental Property Dates & Numbers That Matter.
Date of Conversion - If this was your primary residence or 2nd 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 was contracted to move in, and/or "could" have moved in. That would be your "in service" date or after if you were asked for that. Vacant periods between renters do not count for actual days rented. Please see IRS Publication927 page 17 at https://www.irs.gov/pub/irs-pdf/p527.pdf#en_US_2020_publink1000219175 Read the “Example” in the third column. 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 its assets in the usable 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 for the very first time are not deductible.
Repair
Those expenses incurred to return the property or its assets to the same usable 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 for the very first time 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 3rd 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.
1. Does the same hold for converting to a STR (short-term rental)? 2. personal use days only begin to count after conversion, correct? Does have a direct IRS publication reference for this? thank you!
Your rental use would start on November 1st (if the property was available for rental use on that date).
If the property was not available for rental until December 1st (when a renter began occupying the property), then that date would be your placed-in-service date.
So, simply check "Yes" for the question as to whether the property was rented every day since it was as soon as you placed it in service and thereafter, through the end of the year.
So in this case, even though the property was available for rent starting Nov 1, for the question
"Was ABC rented every single day in 2022?" will be Yes?
In that case, how would I split the expense like Real estate taxes, Mortgage interest, HOA, Insurance given this property was my primary residence till Oct 31st. Should I prorate these monthly expenses for 2 months?
For the Real estate taxes and Mortgage interest on this property from Jan 1 to Oct31st, should I again prorate those and enter them as part of Deductions and Credit? Also, in the Deductions and Credit section for this property, how do I respond to :
What kind of property is this loan for?
-Primary home
This is where you live most of the time—can be a house, condo, mobile home, or other property types.
-Second home
This is usually a vacation home. It can be rented out part-time as long as you live there for a certain amount of time each year.
-Other
This includes rentals you don’t live in and business properties.
Same question for the new house that I bought and lived in from Nov 1 to Dec 31st ... will that be my Primary home, second home or other.
So in this case, even though the property was available for rent starting Nov 1, for the question
"Was ABC rented every single day in 2022?" will be Yes?
That is correct since the property was property was rented every single day since November 1st through the end of the 2022 tax year.
You will have to do the prorating manually for the 2022 tax year.
Presumably the house you rented was your old primary residence while the house you began living in on November 1st became your new primary residence on that date.
How to enter vacant and not-for-rent days for a part-time rental property in Turbotax? Our house was available for rental for 8 months, with 160 days actually rented, 20 days of personal use, and 60 days vacant. We moved back in the house the remaining 4 months. Turbotax only asks for days the house was actually rented and days of personal use. How do I enter in Turbotax the days it was up for rental, but vacant, and the days it was not up for rental? Turbotax only asks for the annual mortgage interest (i.e. form 1098) and real estate county tax paid on the house. How do I, or Turbotax, prorate the mortgage interest and local real estate county tax between the days the house was up and not up for rental?
You don't enter vacant days anywhere, as they have absolutely no impact what-so-ever on your tax liability. The only things that matter are days rented and days of personal use while the property was classified as a rental.
Vacant days do not count against you for anything. They are still "business use" days if you did not live in the property as your primary residence, 2nd home, vacation home, or any other type of personal use while/when it was vacant and classified as a rental.