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Category: Tax
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Experience:  over 40 years experience in tax matters
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I converted a primary residence to an investment property in

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I converted a primary residence to an investment property in 2008, recording a loss on Sched E from $9-24k each year since. My property was appraised at $135k in 2007, $100k in 2012 and I now owe $96k.

I've just lost my job and am thinking of moving into this condo. What are the tax implications if I convert the condo to either a vacation home (I'd move back out during high season for rental income) or a primary residence.

Income: $105k past 2 years, will be $75k this year, and may be $50k of UI next year.

Thank you.

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.

If you convert the condo to personal use it will reduce the amount of rental loss to be claimed since you will need to prorate the personal use time/rental time. Deductions such as mortgage interest and property taxes will still be able to be claimed on Schedule A of form 1040 but all other items, including depreciation, will only be deductible for the rental period. Additionally, if you use the property for a significant portion of the year (6 months or more) you will need to file CA as a resident rather than the WA resident/CA non resident treatment you now enjoy.If your income passes the passive activity limits (for deductibility of rental losses) any losses which are incurred will be recorded as suspended losses for use when there is either a rental profit or the property is sold. However, the depreciation for the personal use period will not be included in this.

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