Upgrades during non-rental

When you return your property to rental use, rather than adding the cost of the improvements to your prior adjusted basis, enter the new improvements on the Assets schedule for the rental property as new assets (e.g., new flooring, new roof, etc.). They would be considered placed in service as of the date you hold out the property for rent and depreciated.

Please see this help article for more information.

I have a single family rental property I converted from rental to personal use in 2021 and the Sched E disappeared.

If you converted to personal use on your 2021 return and did it correctly, the SCH E does not disappear from that 2021 tax return. My guess is, you selected the option for "I did not rent or attempt to rent this property in 2021". If so, that would cause the SCH E to be incorrectly deleted from the return. But so long as you have no rental income/expenses to report for tax year 2021, we can live with that.

It was vacant all of 2022 and will be for half of 2023 while I am doing upgrades in the area of $20,000.

That's fine. Not a big deal. Keep all of your receipts for all the work you have done, as proof of your costs. Keep those receipts forever.

When I rent it out again in later 2023, I believe that I have to enter all of the prior accumulated depreciation and carry overs into the new Sched E worksheet that year.

It doesn't work that way. With depreciation, you don't just "pick up where you left off".  You have to reduce your cost basis in the property by the total of all prior depreciation taken. Then depreciation starts over from year 1 using the new, adjusted cost basis for the next 27.5 years.

What happens to the $20,000 in upgrades I did in 2022 and 2023 as the basis will be higher than when I stopped renting it?

I gets included in the new, adjusted cost basis. When you convert the property back to a rental in 2023, your new cost basis will be:

Original purchase price, minus all depreciation already taken, plus the cost of your property improvements.

You'll need to pull the two 4562's for that property from your 2020 tax return. The two 4562's I'm talking about both print in landscape format. One is titled, "Depreciation and Amortization Report" and is the one you will definitely need. The other is titled "Alternative Minimum Tax Report" and you need that one only if the program asks you for any AMT numbers for the property. (Most likely, it won't ask, but you never know)

One important thing to be sure of, is that you don't change the land value. Only change the structure value on the 2023 tax return. Here's an example:

In the program Assets/Depreciation section when entering the asset, you'll come to a screen that will ask for COST and COST OF LAND.  The amount in the COST box will be your adjusted cost basis as discussed above. The amount in the COST OF LAND box will be the same exact amount in that same box on your 2020 tax return.

Now this can get tricky, because the program *DOES NOT* ask you for the cost of the structure separately. The program asks you to enter the total cost in the COST box. Then in the COST OF LAND box you enter that portion of COST that is allocated to the land.  An example, and we'll start with the 2020 form 4562 with the assumption you paid $100,000 in total for the property when you originally purchased it.

In the program, it shows COST: $100,000 and COST OF LAND: 30,000

The program (not you) does the math to determine the cost of the structure is $70,000, and that's the amount that gets depreciated over the next 27.5 years.

On the 2020 form 4562 it shows "Cost (net of land)" as $70,000, which is the cost of the structure and the amount depreciated over 27.5 years. In the "Land" box it shows $30,000 for the land, which is not depreciated.

In the "Prior years deprec" column it shows $7,000 (arbitrary number I picked out of thin air) and in "current year deprec" column it shows $1000 (another arbitrary number I picked out of thin air). Adding those two together indicates I've already taken a total of $8000 of depreciation on the structure.

In 2022-2023 I did $20,000 is property improvements (sometimes referred to as capital improvements.) and converted the property back to a rental in 2023, after all the work was done. Lets figure my new, adjusted cost basis.

Original cost of property: $100,000

Cost of property improvements: $20,000

Depreciation already taken: $8000

So $100,000 plus $20,000 minus $8000 gives me a new cost basis of $112,000

In TurboTax 2023 the amount I enter in the COST box will be $112,000. The amount I enter in the COST OF LAND box will be $30,000, which is exactly the same amount in that box in TurboTax, and the same amount shown under the "land" column on the 2020 from 4562 titled "Depreciation and Amortization Report".

Depreciation will start over from year 1, using that new adjusted cost basis.

Finally, you will need the IRS form 8582 from the 2020 tax return, as that will show you your Passive Activity Loss (PAL) carry overs that you will need for the 2023 tax return. Take note that if the 8582 is not present in the 2020 tax return, it generally means you didn't have any carry over losses. So nothing of concern here if that form is not present.