After only using our rental property for 14 days or less for the last 10 years, this year we will be using it quite a bit for personal use which will reduce the amount of expenses we can claimfor the property on Schedule E in 2015. Two questions about this:
1. Assuming I've had 10K of depreciation each year and this year due to our personal use days we are limited to claiming 4K on schedule E, when we go to sell our property, will the IRS require me to use 10K for depreciation for 2015 when calculating my basis for the sale?
2. If we convert our property to a second home in 2016 and do not rent it at all, again when we go to sell our property, will the IRS require me to use 10K for depreciation for 2016 when calculating my basis for the sale?
1. if your depreciation is limited to 4K, then you will recapture 4K for 2015. IRS will not require you to use more depreciation than you were allowed to take.
2. if home is converted to second home and is no longer a rental, you will not be required to use 10K depreciation. You will use only what you were allowed to deduct for the 2016 if the conversion happened mid-year. If house was second home for entire year, then no depreciation to recapture for that year.
Hope this helps.