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Martin-H
Returning Member

Depreciation applied to part of one year

I have a rental house placed into service in 2018. We rented it full time in 2018 and 2019, and took depreciation on assets for those two years.  In 2020,  we had it on the rental market for 64% of the year, used the house as a residence the last portion of the year. We plan to rent again in future years.

 

When I enter 64% for the percent of business use on the assets, TurboTab is calculating a different amount than my CPA says it should.

 

Example: Washer and dryer units:

 

Acquired: 9/01/18

Cost basis: $1,041

Business percent use: 64.00%

Depreciation basis: $666

Prior deprecation: $404

Method: 200DB HY

Life: 7 years

 

Current yr depreciation:  $116 (according to my CPA)

vs.

Current yr depreciation: $75 (according to TurboTax

 

Any ideas about the difference, and is there a way to have TurboTax calculate it his way?

 

P.S. My accountant also has shows a "rate" of .17490 on his spreadsheet for all of the 7 year assets, 

.02564 for the 39 year asset (house not including land), and .05760 for 5 year assets.

 

4 Replies
martinmarks
Level 10

Depreciation applied to part of one year

If you took it out of service as a rental and converted it to personal use as your main home then you have to enter the date you stopped renting it. If you plan to convert it back to a rental in the future you'll have to refigure the basis at that time and start depreciating it all over again at the new basis. 

Mike9241
Level 15

Depreciation applied to part of one year

the life for appliances in residential rental real estate is 5 years not 7. IRS pub 946 page 29

technically you should file form 3115 to change the life and get the deduction for the missed depreciation.  for the amount involved, I wouldn't do it.  if you override the TT depreciation you will not be able to e-file. TT can not handle situations where the business % changes. so what TT does is based on 64% business use for all years. so it multiplies the original cost by 64% =$666(?) and then subtracts the depreciation taken $404(?) (by the way, 666+404 do not add up to 1041 but 1070)= $262 and multiplied by 40% (depreciation factor year 3) which should give you $105. this is obviously wrong since business use was 100% for 18 and 19. can't say why TT says $75

 

with a $666 tax basis at the BOY and 64% business usage and using a 5-year life depreciation would be:

666 x .64 x .4 = 170 (1041-404)= 637 x .64 x .4 = 163

or with a 7- year life

666 x .64 x 2/7 = 122 (1041-404)=637 X.64 X 2/7= 116

 

 

 

AmeliesUncle
Level 13

Depreciation applied to part of one year

It was 100% business use from January 1st to the date you converted it to personal use.  DON'T enter 64%.

Carl
Level 15

Depreciation applied to part of one year

You're doing things wrong is all. As you work through each individual asset in the Assets/Depreciation section and convert them to personal use, one thing you're asked for is the date of conversion. The program (not you) will figure the correct amount of depreciation based on the date of conversion. Your business use percentage is 100% (one hundred percent) from Jan 1, 2020 up to the date of conversion.

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