Tax Question - Converting Rental Property to Primary Residence?
I have been trying to understand the implications of renting all or part of my new property while I am on my temporary assignment. I will be away for the rest of the year and hope to rent out some portion of my house while I am gone to help offset some of my living expenses while on my temporary assignment.
I have some experience converting a previous primary residence to a rental property so I feel comfortable with the tax implications from converting all or a portion of the property to a rental property and handling maintenance, repairs, etc. However, I know nothing of the implication of turning a rental property back to a primary residence after my temporary assignment is over.
I have found no examples that give me any idea of the implication of converting a rental property to a primary residence. For example lets say I rent out 1/2 the house for 6 months and the deprecation for the entire property is $5,000 for this rental period. I should be able to write off $2,500 for deprecation from the rental income (1/2 of the $5,000). After the rental period I convert the entire house back to my primary residence.
-> What is the adjusted cost basis for the property? Is it [original cost basis] - $2,500 (the amount of deprecation I would claim on my taxes from the rental period)? Or is it [original cost basis] - $5,000 (the deprecation amount for the full property although only 1/2 was claimed on taxes because only 1/2 was rented)?
-> If at a later date I decide to convert the property [again] to a rental property, what are the implications? I assume the cost basis is adjusted downward by the amount I deprecated the property during the first rental period? Would deprecation continue while its my primary residence from when I first claimed it on my taxes during for the rental period?
-> When I sell the property is some deprecation that I must reclaim that I wasn't able to use to offset income on my income taxes?
Anyone with insight please advise - thanks!
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