According to the IRS, you recover the cost of income producing
property through yearly tax deductions. You do this by depreciating the
property; that is, by deducting some of the cost each year on
your tax return.
Depreciation relates to the useful life of the rental house.
The IRS allows you to deduct the depreciation on your rental against
your other rental expenses. It is always best to calculate and take your
rental depreciation ever year that you have your rental house available
for rent since the IRS will assume that you are taking depreciation on
your rental regardless of if you actually take it.
Please refer to this IRS link for more information about rental properties:
https://www.irs.gov/publications/p527/ch02.html
You will need to enter your asset (rental house) information into
TurboTax under the asset section of Rentals in order for the system to
calculate your rental depreciation for the year.
To enter your rental asset in TurboTax Online or
Desktop, please follow these steps:
- Once
you are in your tax return, click on the “Federal Taxes” tab
("Business" tab in TurboTax Home & Business)
- Next click on “Wages &
Income” ("Business Income and Expense" in TurboTax
Home & Business)
- Next click on “I’ll choose
what I work on”
- Scroll down the screen until
to come to the section “Rental Properties and Royalties”
- Choose “Rental Properties and
Royalties” and select “start’ (or “update” is you have already worked on
this section)
Enter your rental
property information through the TurboTax guided questions until you come to a
screen that is titled, Your "rental property name" rental summary.
You will enter your rental property house here under "assets/depreciation"
(see screenshot)
You
need to enter your rental house as an asset (27.5 yr straight line) under this section for
TurboTax to calculate your correct depreciation. TurboTax will guide you to
first report the total cost of the property then ask you to report the land
separately (because land is not depreciable).
