Rental property personal use

[Questionguy101]

Something about the rental property tax rule that I do not understand. According to Pub 527:

"If you rent a dwelling unit to others that you also use as a personal residence, then your deductible rental expenses may be limited. You are considered to use a dwelling unit as a personal residence if you use it for personal purposes during the tax year for more than the greater of:

14 days, or
10% of the total days it is rented to others at a fair rental price."

You lived in your house until 2-15-2012, then you started renting it out on 2-16-2012. The number of days for personal use (46 days) is more than 10% of rental days (32 days). In this case, does that mean the deductible rental expenses in 2012 will be limited even though the house has been a bona fide rental property since 2-16-2012?

[Gretel]

Something about the rental property tax rule that I do not understand. According to Pub 527:

"If you rent a dwelling unit to others that you also use as a personal residence, then your deductible rental expenses may be limited. You are considered to use a dwelling unit as a personal residence if you use it for personal purposes during the tax year for more than the greater of:

14 days, or
10% of the total days it is rented to others at a fair rental price."

You lived in your house until 2-15-2012, then you started renting it out on 2-16-2012. The number of days for personal use (46 days) is more than 10% of rental days (32 days). In this case, does that mean the deductible rental expenses in 2012 will be limited even though the house has been a bona fide rental property since 2-16-2012?

No, it does not. If a residence is converted to rental then as of that date the rental period begins and counting of personal days also, which normally does not happen if a house is converted to rental property.

[Roland Slugg]

Gretel is correct. For more guidance about this issue you may wish to read IRS Pub 527, Chapter 4. There you will also find information on how to figure basis for property converted to rental use.

[Questionguy101]

No, it does not. If a residence is converted to rental then as of that date the rental period begins and counting of personal days also, which normally does not happen if a house is converted to rental property.

Thank you.

So based on the above example, number of fair rental days is 319 and number of personal use days is 0.

Am I correct?

[Gretel]

Yes, but I did not count your days.