Percentage of rental property used for business purposes?
I moved out of my condo last summer and started renting it out in July. While filing my taxes, I was instructed to enter the property as a depreciable asset. However, I'm unsure how to determine the percentage of the property used for business purposes. Should I calculate the percentage based on the number of months the property was rented out during the year?
Answers
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Also, would the Original Cost or Basis be the amount I paid for the condo a few years ago, when I first purchased it as my primary residence?
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Typically, you can divide by the number of days rented vs personal use to obtain the most accurate percentage. When asked by the software, don't enter any personal use days. See 'Days used as a main home before or after renting' on page 27 of the link below. Then you'll only enter the expenses of when it was rented or available to be rented.
Regarding expenses, when no personal use days are reported, the software won't decrease the expenses entered to account for personal use, so you will need to manually calculate the annual expenses by personal use vs rental and then only enter the portion of the expenses that apply to the rental time period. See "Property Changed to Rental Use" on page 22 of the above link.
Page 23 of the above link contains information on how to calculate the "Basis of Property Changed to Rental Use". According to the IRS, "The basis for depreciation is the lesser of:
• The FMV of the property on the date you changed it to rental use; or
• Your adjusted basis on the date of the change—that is, your original cost or other basis of the property, plus the cost of permanent additions or improvements since you acquired it, minus deductions for any casualty or theft losses claimed on earlier years' income tax returns and other decreases to basis."If you have any additional questions in regard to reporting your rental property information, please contact "Support" from within your account and they will be happy to guide you.
