Here's the problem.
You are including the property improvements as "a part of" your initial entry for the property itself. The Turbotax program flat out does not do the figures correctly when you do that. Here's what I think is happening to you.
You enter the property in the assets/depreciation section and during that process it asks you for property improvements and you enter them as "a part of" that initial entry. The problem is that the program does not add those property improvements to the structure value only. It adds it to the total value and then figures the deprecated structure value based on that total. Exampe:
FMV of property (your cost basis) on the date your parent(s) passed: $100,000
Then based on your property tax bill 30% of that value is allocated to the land.
Therefore the non-depreciated land value is $30,000 and the depreciated structure value is $70,000. However, while making that initial entry you were asked for property improvements and you did $30,000 of property improvements after you acquired the property and before it was placed in service as a rental.
That makes your new cost basis $130,000. Then using the percentages based on the allocation of your last property tax bill, 30% of the land value is *INCORRECTLY* figured at $39,000 and 70% of the structure value is *incorrectly* figured at $91.000.
So what you have to do is enter the property itself using the values *WITHOUT* including your property improvements. Then enter the property improvements as a physically separate entry, even though both will have the same "in service" date.
The initial entry of the property itself will properly allocate 30% ($30K in my example) to the land that will not be depreciated, and 70% ($70K in my example) that will be depreciated over the next 27.5 years.
Then you will enter your $30K of property improvements as a physically separate entry also in the assets depreciation section, also classified as Residential Rental Real Estate. The structure value of this entry will be $30,000 and the land value will be $0 (ZERO).
This way, the the total structure value of $100,000 will be depreciated over the next 27.5 years, and the land value of $30K does not change and will not be depreciated.
Does this make sense to you? I can understand if my attempt to explain this to you may be hard to wrap your head around - especially if my assumptions about your specific and explicit situation are wrong.
