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Rental property turned to principal home.

ChiHoang
Level 4

I have a client who uses his rental property for less than 2 years as his principal home. How do I report that in ProSeries Basic ? Thanks 

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9 Comments 9
sjrcpa
Level 15

Did he sell it?

The more I know, the more I don't know.
ChiHoang
Level 4

No. He uses his rental property for his principal home.

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taxfaks
Level 3

@ChiHoang 

Is he renting a portion of the home while he resides in it?

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ChiHoang
Level 4

No

Can someone help to answer my question ? Thanks

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dkh
Level 15

If the rental property is no longer a rental property but is now the principal residence there is nothing to report on Schedule E.    Any expenses (repairs, utiltiies, etc) are now personal expenses therefore not deductible.    Mortgage interest, real estate taxes would be Schedule A deductions.

ChiHoang
Level 4

So when they sell that home if they stay in there more than 2 years, there is no tax on capital gain. Is it right ? 

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taxfaks
Level 3

@ChiHoang Since it was a rental for a period of time, most likely a prorated portion of the gain will be taxed. 

sjrcpa
Level 15

And gain to the extent of prior depreciation will be taxed.

The more I know, the more I don't know.
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ChiHoang
Level 4

Yes, recapture of depreciation. Thanks

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