You move into your own rental property: what happens to depreciation, deductions and the books

Pick the date: the rental ends when personal use starts

Rental expenses and depreciation are tied to the property being held for rent. IRS Publication 527 says that if you change a rental to personal use, you stop treating it as rental property, and depreciation ends. See IRS Publication 527. Mark the date you moved in, the date the last tenant left and the date the lease ended. A short gap after the tenant leaves, while you are actively trying to rent it, is different from the day you decide to live there.

Keep proof of the date: the end of the lease, a utility transfer, the date on your driver's license or voter record. The year splits at this date, and the date will matter again if you sell.

Closing the rental books

1. Record the last month's rent and apply or return the tenant's security deposit, as in security deposit deductions at move-out.
2. Pay the final rental bills and reconcile the bank account up to the move-in date.
3. Stop recording depreciation after the date, and leave the accumulated depreciation on the books. It does not disappear.
4. Split bills that cover the whole year, like property tax and insurance, between the rental part of the year and the personal part.
5. Move the remaining LLC cash to yourself as a draw, or close the rental account when nothing is left to pay.

Example a made-up owner moves into a house on August 1. The house was rented from January 1 through July 31, which is 31 plus 28 plus 31 plus 30 plus 31 plus 30 plus 31, or 212 days. For the year, the property tax is $6,000, insurance is $1,825 and mortgage interest is $8,030. Using days, the rental share is 212 divided by 365 of each.

Property tax is $6,000 times 212 divided by 365, which is $3,484.93, rounded to $3,485. Insurance is $5 a day for 212 days, which is $1,060. Interest is $22 a day for 212 days, which is $4,664. Using days is a reasonable method, not the only one. If a bill was paid and covers a specific time, use that period. Your preparer may use another method.

Rent for the seven months goes on Schedule E as income, along with the rental share of costs and the last partial year of depreciation from the IRS tables. The costs after August 1 are personal. The personal share of mortgage interest and property tax may be an itemized deduction on Schedule A, subject to limits.

Depreciation you already took

Depreciation reduced your basis each year you rented. The IRS says to reduce basis by depreciation allowed, or allowable, whether or not you claimed it. That means the basis of the house is lower when you move in than when you bought it. See IRS Publication 523 on the sale of a home and IRS Publication 946.

If you forgot to claim depreciation in past years, the basis is still reduced, which is why it matters to fix a missed claim, as in forgot to depreciate: Form 3115.

Example a made-up owner bought the house for $300,000, of which $60,000 was land, so the building was $240,000. After years of renting, accumulated depreciation is $50,000. Adjusted basis when the owner moves in is $300,000 minus $50,000, which is $250,000. If improvements of $20,000 were made, basis would be $270,000. The $50,000 stays on record for the sale.

What it means if you sell later

If you live in the home as your main home and later sell, you may be able to exclude part of the gain if you meet the ownership and use tests. Publication 523 explains the two out of five years rule, the dollar limits, and two limits that matter here. Gain equal to depreciation claimed after May 6, 1997 cannot be excluded, and a period when the home was not your main home before you moved in can reduce the exclusion.

Rented years before you moved in are the situation the home sale rules are written around, so do not guess. Ask your preparer to run the numbers before you decide when to sell. A longer discussion of the opposite direction is in renting out a former home.

Records to keep for the day you sell

• The purchase closing statement and the split between land and building.
• A list of every capital improvement, as in tracking improvements by unit.
• Each year's depreciation, taken from your returns or the books.
• The date the rental ended and the date you moved in.
• The final rental year's Schedule E.

Keep them for as long as you own the home and for the usual period after the return that reports the sale. See how long to keep rental records.

How DoorKeeping handles it

In DoorKeeping the property's books keep the ledger, the accumulated depreciation and the tenant records, so you can mark the date the rental ended, run the final month-end close and export the Schedule E report for the months it was rented. Ask Claude or ChatGPT to prorate the year's bills by days and propose the entries, then approve them with one tap. Rent stays in your own bank: tenants pay you directly and DoorKeeping never holds it. DoorKeeping does not give tax advice, so confirm the dates, the split and the sale rules with your tax preparer.

Sources

1. IRS, Publication 527, Residential Rental Property (2025), read Oct 30, 2026
2. IRS, Publication 523, Selling Your Home, read Oct 30, 2026
3. IRS, Publication 946, How To Depreciate Property, read Oct 30, 2026

Questions

When does depreciation stop if I move into my rental?

When the property stops being held for rent and you start using it personally. Publication 527 says depreciation ends when the use changes.

Do I lose the depreciation I already took?

No. It stays on record and reduces your basis, so it matters if you sell the property later.

Do I still report rent for the part of the year it was rented?

Yes. Report the rental months on Schedule E with the rental share of costs, and treat the rest of the year as personal.