There is no shortfall in the program on this, and never has been for any tax year. Not ever. It's user error. Let me explain. There are two questions the user is asked when renting out property, be it a completely separate rental property or rooms in one's primary residence. For the latter, people will almost always misinterpret one or both questions resulting in wrong answers. Because of those wrong answers either no depreciation occurs, or the depreciation is *blatantly* way off what it should be. I'm paraphrasing the two questions here because they're more akin to data entry boxes that are not worded as a question.
- First, you are asked for the percentage of business use. The percentage of business use is *one* *hundred* *percent*. Even if you rented out part of your primary residence. For the part (or rooms) you rented out if it's 20% of your residence, then that 20% was One Hundred Percent business use.
- Then you are also asked for the number of days of personal use. That will be ZERO DAYS of personal use. Weather it's a separate rental property or rooms you rent out in your house, during the period of time it was classified as rental property, it was used "ZERO" days for the property owner's personal use for the entire time the property or space was *classified as a rental*. What you used the property or space for before converting it to a rental *does* *not* *count* for anything what-so-ever.
So if you converted the rooms to rental in Sept of 2013, on your 2013 tax return the percentage of business use for those rooms from Sept-Dec of 2013 was one hundred percent business use. The number of personal use days from Sept-Dec of 2013 was ZERO days.
So more than likely you answered those two questions wrong *every year* claiming personal use days as well as less than 100% business use. Your numbers for those two questions were of such that no depreciation was taken because, based on your numbers (which were wrong) depreciation was not required to be taken.
Now with that out of the way, in order to fix this you'll need to file IRS Form 3115 with your tax return. That form *IS* complicated (though it may look simple, it's not) and requires professional help to ensure it's done right. Do it wrong, and it just results in a never-ending nightmare with the IRS from which you may never awaken.
