Question

Not currently renting out.

Forum|Forum|4 years ago
April 12, 2022
2 replies
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I have a vacant rental house that I am restoring after the last covid tennants didn't pay rent and seriously trashed it. I am taking my sweet time which may be a few years. I don't need the income and don't look forward to having it destroyed again. Do I continue to file sched E to write off property taxes, insurance, depreciation, utilities and all of my materials for improvement and repairs to account for all costs, or is it better to stop filing sched E until or if I ever rent it again or just sell it?

Not A Product Question

ColeenD3

No, the moment you stopped actively seeking tenants, it was no longer a rental property. Print out your Schedule E and supporting worksheets, plus forms for depreciation and passive losses if any. One you know you have converted it back to personal use, you can delete it the following year.

It becomes your second home and you can still take the mortgage interest and property taxes on Schedule A. If you once again place it in service, you will have to account for the depreciation and losses.

Carl11_2

Employee

You need to convert the property to personal use, and do it correctly and completely.

When you start working it through, in the property profile section you'll have a selection for "I converted this property from a rental to personal use in 2021". Select that option

In the Asstes/Depreciation section you need to work through each individual asset one at a time.

- I stopped using this asset in 2021. Select YES

- Date of disposition - One day after the last renter moved out.

- Special handling required?" YES. (If you select NO, you will be *forced* to enter sales information)

Do the above for each asset listed in the assets/depreciation section.

When you have completed your tax return entirely, you need to print out the following, as you will need it in the future.

- There are two Form 4562's that both print in landscape format. One is title "Depreciation & Amortization Report" and the other is "Alternative Minimum Tax Depreciation Report"

- IRS Form 8582-Passive Activity Loss Limitations.

Print and store those 3 documents with your original purchase paperwork for the property. You will need them when one of three things happens in your future.

1) You sell the property

2) The convert the property back to rental

3) You die.

Note that if you have anything being "amortized" shown on the 4562, you handle that differently. Let me know if you have that. Most likely, it would be financing expenses or refinancing expenses unless they were fully deducted in the year you purchased the property.