 We're gonna say the mortgage interest Let's go to the interest is We said on the personal side a 1-3 mortgage interest 1-3-5-0 and then the taxes We said was 900 so taxes We're gonna say on the real estate was 900 now. That's not gonna be enough to kick me over The standard deduction which in this case is the 12,950 But that mortgage interest and the property taxes as well as possibly state taxes are usually the thing that could possibly Kick people over in that if I looked at the schedule a if these amounts were greater than the standard deduction Then we'd be able to take those amounts. So we have to think about whether or not We're gonna get the benefit from the the mortgage interest and The real estate taxes and properly allocate them between a schedule a and a schedule e Now then we would also have to put on the books the Depreciation of the property and we'd have to think about you know What the cost of the property is if we purchased it it would be for more straightforward If we converted it then we got to compare our cost bases to to the fair market value We've got to make sure that we're breaking out building versus the land So let's first just put that on the books. I'm gonna say that we have a depreciable item Now I'm gonna indicate to the software that the the basis is 39,000 for the building and 7,000 for the land the land is not going to be depreciated the building will but it's gonna be broken out 25% of that is gonna be the depreciable Our component to it. So if I go back on over and I say, okay, what happens with the depreciation schedules? So now it's the cost. Let's go to this one is 39,000 25% of that is gonna be that 7,950 for the depreciable basis because that's the amount I'm assuming is the rental property Using our percentage and then we have the straight line method. It's a mid month convention 27.5. This is the rate from the table gets us to that 310 and then if you went to depreciation for the next year, you could see it would be 355 and that depreciation is gonna continue out for For the 27.5 years the land not depreciated. So if I go back on over to the schedule E We have now added The depreciation to our calculation if I was to do my bookkeeping then of course that's something that I would probably need to add To my bookkeeping that will be dependent upon the calculation From you know the tax software to get this number to the bottom line and our tax system adding You know the depreciation deduction to our calculation Now another scenario that is similar to this scenario is let's say that we we had I'm gonna delete this column that we had someone that Converted their personal property to the rental property and then they had a partial year of Rental in the first year. So now you can have a similar situation with your income statement That needs to be broken out in the portion that is personal Versus the business portion that's gonna be broken out. So for example, if I if I have these same numbers over here Representing this is income income Income Representing the income and expenses for the entire year Then I've got to say okay what Let's say the income. Let's let's say the income was actually 11 months of renting. Let's say it was 750 times 11 so that's gonna be the income that we had the expenses down below I'm gonna delete these and I'm gonna come up with a new ratio analysis It's going to be that months of the year for the rental. Let's say was only was 11 months rental and then we're saying months For personal so let's say was was one month. So 11. This is gonna be months for rental Versus months for personal is One so that means it's gonna be equal to So the total months of course is 12 So months in year 12 I'm gonna underline this un-underline So the amount that's gonna be allocable to the rental is gonna be equal to 11 Over 12 the ratio 11 over 12 91 point six seven percent because that because we converted it Starting at the end of you know in February. So you got 11 months rental one month personal then you've got a similar breakout the rental income is Because obviously when it was personal we wouldn't have had any rental income and then the the rental side is gonna be this Times this again. I'm gonna select f4 So that I could copy that down However, if I had repairs that were designed just for the rental during the rental time I mean I could I could assign that just to the rental side of things the personal side is gonna be This minus this Copying that down and then I could sum it up summing up There's gonna be our expenses on That scenario Type of situation so a similar a similar kind of ratio calculation is is gonna be necessary You know when that conversion happened But this time instead of happening all every year it would only happen in that first month And then we've got our adjustment here for our rental income and then our depreciation We'd have a similar kind of thing for the depreciation, but let's put this into our system I'm gonna imagine the depreciation is the same, but now I'm not gonna be breaking it out between personal and business use We're just gonna have that 11 months which will be calculated by the system because I put it on there It's gonna use that mid month our convention So now the depreciation I'm assuming is gonna be about 39,000 again, but we're not allocating between business and personal We're just gonna say that we put it on the books, you know in in them in the First or the second month, which means it's gonna use a mid month convention straight-line mid month convention in order to get this time to the 1241 which is gonna pull into the schedule E. So now we've got our calculation here. There's the depreciation calculation Now remember that when the conversion happens because we didn't purchase the property We might have to do some kind of calculation For what for what our basis is and compare it to the fair market value and that might look something something like this we'd say well we had The house cost before we converted it whenever we bought it 25,000 and we're gonna say then we remodeled it remodeled kitchen Is gonna be four thousand two hundred we'll say when we did that recreation room we added was five thousand eight hundred good times in that room new roof improvement one six and hat to and Deck we're gonna say two thousand four hundred and so that's where we're getting our adjusted bases in The building because we broke out building versus the land the depreciable component is the thirty the thirty nine thousand We have to do some kind of calculation like that Which can be a little bit messy on the personal side of things because the personal residence You might not be tracking as much of the cost of things that you did Because you're not getting the benefit of depreciating it at the point in time that's happening because it's personal side of things But then when you sell it or convert it it becomes important because we need to compare this adjusted bases To the fair market value and basically take the lower one