While taking a closer look at the sheets view for a rental property, we realized our property depreciation chart did not match the entered deduction.
After reviewing the last five years of filings, we found the problem originating from an entry on our 2020 tax return. When trying to understand what happened, we remembered that our 2019 tax return software file was corrupt, so we had to rebuild it in the software for the 2020 return by using our PDF copy of our 2019 return.
To be more specific, we accidentally took the rental property entry for "previously depreciated" off the 2019 return and entered it as-is on the 2020 return for "previously depreciated." (This was inaccurate: we should have entered a larger number that represented the previous 2019 depreciation + the 2019 depreciation amount to figure out the correct entry for the 2020's previously depreciated number.)
To complicate matters, a new line item appeared starting in 2020 "AMT Adjustment" for ~$150. We are unclear if we made this entry in error or if the software made it in an attempt to correct/adjust for not matching the asset depreciation sheet. This extra deduction amount has stayed static dollar wise through each tax return since.
Net Result: We have taken more depreciation than we are supposed to.
How do I fix this for past returns and this year's return?
To make this more complicated, I only realized this issue when I tried to take the one big house depreciation line item and split it into two separate 27.5 year depreciation buckets -- house building depreciation and house HVAC depreciation. This should have been straightforward as you can enter the old in-service date and it auto-populates for 2024. I expected the two new line items to equal the previous larger line item and it didn't. That's when I knew something wasn't right.
If you are wondering why I was trying to separate the original HVAC out from the building, it is because I replaced the HVAC system in 2024 and I should be able to write off $1,200 if I can retire the original HVAC. You can't, however, retire it unless it is a separate line item from the building.
