After much digging into depreciation tax law, I finally found an explanation that other short term rental hosts might find useful. Current convention requires using Straight Line (SL) depreciation which nominally uses the same depreciation percentage each year over the required 27.5-year depreciation period. But it turns out that SL depreciation is very misleading. The catch is what they allow in any one year. There, the required depreciation switches to what I call "Bent Line" depreciation. For instance, if my 19-day rental period were in January, the IRS Schedule E, Form 4562 Instructions for line 19g, on page 10, describe how to calculate the deduction using 3 steps. Step 1 took me to the SL method, Step 2 required me to divide my basis (already reduced by the ratio of 19 days/365 days) by 27.5 years. Step 3 solved my mystery by requiring me to use their mid-month (MM) tax table where I had to multiply, the already twice reduced step 2 deduction, by an even steeper x 0.125 because my rental period started in November. If it had started, say, in January I would have had to only multiply by 0.9583. Why? Because the intra-year depreciation rule uses the "Bent Line" convention where, unlike yearly increments which are constant, the monthly increments are bent to drastically drop from January to December. This effectively means that renter wear and tear depreciation is almost fully allowed if it happens in January but - look out if your do your short-term rental in November - because there it is reduced much more by x 0.125. (As if the later the month it occurs in somehow mitigates the depreciation effect of having renter wear and tear on your property!) I wonder if the tax law is written that illogically or if the IRS just interprets it that way, but it makes no sense to me. To test my theory, I moved the rental start date in TTax to 1/24/2021 instead of the actual 11/24/2021 date and, sure enough, I now get about the same $280 deduction (vs. $36) that TTax does for my $150K remodel in 2013. So, to TTax's credit and credibility, they do seem to be applying the regs correctly (as illogical as they are). The only things I would like TTax to do differently are to explain this a little better to rental novices like me and to fix their "tax guidance" error which now takes users to the wrong Form 4652 instructions page for line 19g. It now sends you to the page for line 16 instead and thus forces you to rely on searching externally for 19g.
