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Rental unit in house taken out of service but placed back in

Level 4

Hi, I'm hoping someone has encountered this situation and knows the best way to make entries in Lacerte for depreciation for a rental that was temporarily converted to personal use.  Thank you in advance for reading the background:

Taxpayer converted a basement in their personal house into a rental unit and started renting in March 2020.  I set up depreciation based on original purchase price, which included the basement with land/building broken out by percentages found on the property tax statements. The basement conversion to living quarters cost just over $100,000.  The square footage of the apartment is 27% of the total house.  On depreciation screen 22, I entered placed in service dates of 3/1/2020 for all 3 assets (original building, land and the remodeled basement apartment) and  I entered  .27 under "Percentage of business use" for the original building portion.  The addition is 100% for the rental, so I did not enter a business percentage.

Due to covid, the taxpayer stopped rental for the first half of 2021 but used the apartment to care for family members.  They rented the apartment from July - Dec 2021 and then took it out of use again so not contiguous business v personal use.  They plan to rent again sometime but I don't know if/when so I need to track properly.

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1 Comment 1
Level 15

Because the rental periods have been less than one year, I would use the "vacation home" rules and prorate things by the number of days it was rented (for that portion of the home).

If the rental use or the personal use exceed one year, then you may need to alter things, but based on 2020 and 2021, I would use the "vacation home" rules for that portion of the home.