Can the I override the TurboTax calculation so that I don't lose the remaining depreciation, which totals $3,528
You can. But if you do, you will not be able to e-file the return. You'll have to print, sign and mail it to the IRS. If a state return is involved here, that would also apply to the state return.
Why they were set up to be depreciated over 15 years is beyond me too. To the best of my knowledge, only land improvements are depreciated over 15 years. For example, a new culvert to replace the collapsed one under the driveway, or installing/rebuilding a retaining wall to stop erosion of the land. A new furnace & Central Air doesn't even come close to a land improvement.
Both of those items became "a permanent and physical part of" the structure. So they should have been classified as Residential Rental Real Estate and depreciated over 27.5 years.
It would appear that in turbotax they have been clssified as appliances, based on the 5-year depreciation you mention. That's just wrong.
Now what you might try, is entering those assets as "other asset" where you can chose the depreciation period and account for the SDA taken the first year. Seeing as when those were placed in service, if they had been properly classified then neither would have been eligible for SEC179 or the SDA (Special Depreciation Allowance).
Besides, it's highly likely that neither SEC179 or SDA would have made any difference in your tax liability anyway. Especially if there's a mortgage on the property.
When you add up the deductible expenses of property taxes, mortgage interest, property insurance and depreciation you're required to take, those four items alone will usually exceed your total rental income for the year. Add to that other deductible expenses (HOA fees, repairs, maintenance, etc.) and you're practically guaranteed to show a loss "on paper" at tax filing time every single year. Those losses just get carried over to the next year, meaning that your carry over losses increase with each passing year. Those losses are "realized" in the tax year you sell the property, thus helping to reduce the taxable amount of any gain on the sale, as well as recaptured depreciation.
Overall, the correct thing to do is to get things right. This is done by filing IRS Form 3115, which while included with the TTX program, it is not simple by any stretch. Do it wrong and it makes things worse. You'll find yourself in a never ending nightmare with the IRS from which you will never awaken. This is exactly why I suggest folks get professional help when it comes to "fixing" things with the 3115. Overall, that's what I recommend. But your other option is to enter those assets in the section for "Other Asset Type" and see what works for you. Just remember, if you do an "override", you will not be able to e-file federal or state.
