Taxes: When Filling Out Schedule E Asset Entry Worksheets, What Items Do I Include For The House’s Basis?
Am I doing this right?
For a rental unit that I formerly lived in, the following improvements that were placed into service prior to converting it to rental:
* Hardwood floors
* Appliances (refr., stove, dishwasher)
* Bathroom vanity + granite
* Data wiring
* Storm door
* Lights
The following improvements were placed in service after I started renting:
* Kitchen + bath tiles
I included everything from before renting aside from the appliances under the asset entry for the residential unit itself.
The appliances were entered on seperate sheets for each appliance and NOT depreciated with the residential unit.
Because I bought and installed the tile after I started renting, I have these on a seperate asset sheet, with type of asset set to “I”.
Is that all correct? Another question I had about the appliances is that if I sell the unit at some point, will they still count against the res. unit profit even though they are on a different asset sheet?
Cost, including escrow closing costs and capital improvements you made before offering it for rent.
On a conversion your basis is the lesser of the fair market value at date of conversation or your adjusted basis (which is your cost and improvements prior making the conversion to a rental). Do not forget to subtract the land value as that is not included for depreciation. Then for asset entry you will enter the new rental’s basis and the improvements after it was a rental. Your cost for appliances are included in your adjusted basis on the date of conversion – they do not get depreciated separately. Only improvements/appliances after conversion get depreciated. It is now a rental unit so if you sell it now it’s a rental sale – excludable gain doesn’t apply. BTW – don’t forget that you must also separate the part of the year that this was personal residence prior to conversion to rental. For example – your mortgage interest – the part of the year it was still your residence goes on Schedule A and the rest goes on Schedule E. Hope I’ve helped a little, it can get confusing.