There appears to be a Turbo Tax error when determining the first year's depreciation amount of a primary home converted to a rental property in 2021.
If you enter the information to calculate the cost basis, then you'll get a message like this: "The $255,446 cost of your building will be depreciated over the next 27.5 years." Thus the house depreciates $9288.95 per year.
If the conversion from primary home to rental occurred in August 2021, I'd then expect the depreciation value for 2021 to be 9/24 * 9288.95 = $3483.36. Here the 9/24 comes from using the mid-month convention where the first month counts as half a month so the middle of August leaves 9/24 of the year when it was a rental property. Instead of seeing a depreciation deduction of $3483.36 for 2021, I'd see a value of $1306.26. Took me awhile to make sense of this value, but it turns that out this value is 9/24 * $3483.36. In other words, as far as I can tell, Turbo Tax is pro-rating (multiplying by 9/24) the yearly depreciation value twice! If I simply go through the pages and questions for the "New rental property" asset, I encounter this error which leads to significantly more taxable income.
This doesn't seem like the right way to fix the error, but this worked for me: I selected "Add expense or asset" and then checked "Improvements, furnishings, and other assets". I then went through these pages and truthfully answered that I didn't make any improvements. Your cost basis and cost of land should already be filled in from the "New rental property" section. If the property was used 100% as a rental after the conversion date, then you answer that you've always used the asset for business purposes 100% of the time. This isn't referring to time before the conversion date. Completing his series of questions calculates the first year's depreciation amount correctly to be $3483.36. But beware, if I revisit and complete the "New rental property" questions again, Turbo Tax recalculates the depreciation amount to be the original lower and incorrect value.
Hope this is helpful to others.
