Confused about TurboTax's handling of rental property that has been converted to primary residence mid-2016

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cflannagan
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Confused about TurboTax's handling of rental property that has been converted to primary residence mid-2016

Post by cflannagan » Sun Feb 18, 2018 4:38 pm

Basic facts:
- We converted our primary residence into rental property in 2014 (while we lived out of state for 2 years).
- We converted this rental property back into primary residence June 2016 and have been living here ever since.

I am fairly sure I told TurboTax (for TY2016) that I converted the rental property into primary residence, and it seems to ask proper questions (ie: how many days out of the year was for rental usage, and how many otherwise, etc).

However, while doing TurboTax for TY2017, - based on what software found for previous year TurboTax filing - it seems to want to include the rental property data in it (despite the fact that there is NO rental activity at all for whole of TY2017). It wanted to put in an amount of "depreciation expense or depletion" (line 18, Schedule E, Form 1040). Is this normal?

If I remove this amount (zero it out), my tax bill rises roughly $3,000, so this seems like a pretty important consideration. I want to make sure I update TurboTax correctly but don't understand the tax laws regarding "deprecation" in regards to primary residences after it was converted from rental property - is there such a thing? Or did TurboTax make a mistake?

Thanks in advance!

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