What expenses can I deduct on my rental property taxes after converting my home?

Thanks for the clear explanation! Two follow-up questions: 1) How do I figure out the building vs. land value split for depreciation? My county tax assessment shows the property is worth $420,000 with land being $140,000. Can I use that ratio? 2) I've heard something about "recapture" of depreciation when I move back in - what does that mean exactly?

You can absolutely use the county tax assessment to establish the building-to-land ratio for depreciation. If your assessment shows land worth $140,000 out of $420,000 total value, that means about 33% is land and 67% is building. Apply that ratio to either your adjusted basis or fair market value (whichever is lower) when you converted the property to a rental. Regarding depreciation recapture, you don't need to recapture anything when you move back in. However, if you eventually sell the property, the IRS will "recapture" the depreciation you claimed during the rental period by taxing it at a 25% rate (regardless of whether you actually claimed the depreciation or not). This is why it's important to track your basis adjustments carefully when converting property between personal and rental use.

Does taxr.ai connect with property management software? I'm using Buildium to manage my rental and wondering if there's a way to import that data directly rather than uploading individual docs.

I'm skeptical about these tax tools. How accurate was it really? Did you have a CPA review the results afterward? I'm worried about getting audited if I use something automated for something as complex as rental property taxes.

The tool doesn't directly connect with Buildium yet, but you can export reports from Buildium as PDFs and upload those. I actually found this worked well because I could upload the annual summary reports that had all the income and expenses already categorized. As for accuracy, I did have my accountant review everything afterward. He was actually impressed with how thorough it was - said the depreciation calculation was spot on and that it correctly handled the mid-year conversion. He only made a couple of minor adjustments related to some specific state tax issues. The documentation it provided would definitely help if you ever got audited since it explains the reasoning behind each deduction.

How does this actually work? Seems impossible that they could get through when the IRS phone lines are always jammed. Do they have some special access or something?

Sounds like a scam to me. Why would you pay someone else to call the IRS? And how would they possibly get through faster than anyone else? The IRS doesn't give priority access to third parties. I'm betting they just take your money and you still wait forever.

It's not special access - they use technology that continuously redials and navigates the IRS phone system so you don't have to sit on hold. Once they reach a certain point in the queue, they call you and connect you directly with the agent. It's basically just automating the hold time. Regarding whether it's worth paying for - depends how much you value your time. I was spending 3+ hours on hold across multiple days without ever reaching anyone. This got me through in about 15 minutes of my actual time. The agent I spoke with gave me specific guidance on my rental property depreciation questions that saved me way more than the service cost.

That's really helpful about the mileage - I didn't even think about that! For repairs, I replaced the water heater about 2 weeks before the tenants moved in. Would that count as a rental expense or would I need to depreciate it?

The water heater replacement would likely be considered a capital improvement rather than a repair since it's replacing an entire unit and extends the life of the property. Since you did it just 2 weeks before renting, you can include it in your depreciable basis for the rental property. For smaller repairs like fixing a leaky faucet or painting, those would be fully deductible in the year you paid for them. The timing (2 weeks before rental began) is close enough that the IRS would generally accept these as rental expenses since they were clearly in preparation for renting.

For a 3-year rental period, all the same deductions apply, but there's one major difference to be aware of: when you sell the house later, you might partially lose your primary residence capital gains exclusion. The rule is you need to have lived in the house as your primary residence for at least 2 of the 5 years before selling to get the full $250k/$500k capital gains exclusion. With a 3-year rental period, you'll need to move back in for at least 2 years before selling to get the full exclusion.