Bonus depreciation help

[jjUpOnHill]

Hi, for some reason my bonus depreciation isn't showing up. I did a test scenario, it's still not showing up. 

I have a short term rental which I entered into TT as a commercial property so it can be depreciated over 39yrs per segmentation cost study. I then entered all of the improvements I did into TT to get bonus depreciation at 80% for 2023. However, I'm seeing in my Schedule E that all of the items are entered are showing up as "passive disallowed loss". Given that it's a STR, all of the "losses" should be active. I'm wondering what I'm doing wrong or not doing that's causing TT to think that it's a passive loss?

[MarilynG1]

Generally, passive activity losses that exceed the passive activity income are disallowed for the current year. 

You can carry forward disallowed passive losses to the next taxable year. A similar rule applies to credits from passive activities. 

Did you indicate in TurboTax that you actively participate in your rental activity?

Here's more info from IRS Topic No. 424.

[AmeliesUncle · Accepted solution]

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@jjUpOnHill wrote:

Hi, for some reason my bonus depreciation isn't showing up. I did a test scenario, it's still not showing up. 

I then entered all of the improvements I did into TT to get bonus depreciation at 80% for 2023.

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It still should "show up" on Schedule E, even if the program limits the loss.

Are you sure the "improvements" qualify for Bonus?  Many improvements would not qualify.

Do you "Materially Participate" in the rental activity?

At any rate, the main problem is that it seems that TurboTax is not set up for non-passive, short term rentals.  *IF* you Materially Participate in the short term rental, it should be non-passive.  I'm not aware of any work-around if you are using the online version of TurboTax.  But if you are using the CD/downloaded version, you can to into "Forms" mode.  Then you access the "Schedule E Wks" and then check the box for "Other passive exceptions".

[jjUpOnHill]

Yes, you're right! I had to go into the form and click on "material participation" and "other passive exception" which allowed the non-passive deduction since it's a STR. Thank you so much for your help!