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Level 2
February 19, 2023
Solved

TurboTax Business Calculating Depreciation Expense for Rental Real Estate with Personal Use

  • February 19, 2023
  • 1 reply
  • 6 views

I am struggling to have TurboTax Business correctly calcuate my Depreciation Expense for my Rental Real Estate property because TurboTax Business's logic does not appear to accept different business use percentages across different years.  The problem with TurboTax Busines is that there is only one place to enter % business use which it then applies to all years that the asset has been in use.  Based on reading other posts in the Community it seems that other TurboTax products ask about a % business use in a specific year.  How do I accurately report my depreciation expense for the current year when the % business use is lower than previous years?

 

Here is a simple example of the issue:

I purchased and used the property for 100% business use in year 1.  In year 2, I used the property for personal use for some of the year (30%) and rented it for the rest of the year (70%).  Below are the depreciation calculations.

 

Depreciable Amount: $275,000

Useful life: 27.5 Years

Straight Line Depreciation Expense should be $10,000 each year at 100% Business Use.

 

Year 1: Asset purchased Jan 1, 2021. 100% business use.  I depreciated $9,583 in accordance with IRS rules on Mid Month convention: (3.485% * $275,000 = $9,583)

Year 2 (current year): 70% business use. Depreciation Expense should be $7,000 (70% of $10,000)

In TurboTax Business I entered 70% as the business use percentage and $9,583 as all prior year depreciation.  However, by entering 70% as the business use percentage, the program thinks that it was 70% in all previous years and that Year 1's Depreciation should have been $6,708 instead of $9,583.  Thus, it is computing this years's depreciation expense for Year 2 as $6,892 because it wants to adjusts all future depreciation expenses by the excess it thinks I took in year 1:

(6,708-9,583)/26.5 years = -$108.

$7,000-$108 = $6,892.  

 

This screenshot shows that Turbo Tax Business only gives one place to enter % business use and does not tie it to a specific year.

 

Best answer by Anonymous_

Manual adjustments are required even in the personal income tax preparation products,

 

1 reply

Level 15
February 19, 2023

Manual adjustments are required even in the personal income tax preparation products,

 

95461Author
Level 2
February 22, 2023

I am using Turbo Tax Business, not Turbo Tax Home and Business. The solution you provide is not available in Turbo Tax Business, but I believe that it should be and would solve the problem.

Level 15
February 22, 2023

No, even the individual income tax preparation products do not support business use that varies from year to year.

 

See https://digitalasset.intuit.com/DOCUMENT/A2ETBITdw/122122-2022-unsupported-calcs-L1FQfTTgn.pdf