Can I get someone to weigh in on this? Am I missing some nuance of depreciation that makes what TurboTax is doing correct? I think it might be treating the depreciation in some way relevant to sellin...
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Can I get someone to weigh in on this? Am I missing some nuance of depreciation that makes what TurboTax is doing correct? I think it might be treating the depreciation in some way relevant to selling a house, but this approach doesn't make sense to me in this context. I created a new TurboTax account did some targeted tests changing office-use percent and in-service dates. Given a home with a total basis of $390k, a whole-year of 10% office use using the straight-line method over 39 years should give us depreciation of $1,000 a year. A 5% office would be $500 a year. Move the in-service date to December 31st to limit the effect of the Mid-Month accounting rules. Home size is entered as 1000 sq ft, and no other expenses are listed for the house. Home-office in-service date can be any prior year, and it doesn't seem to matter as long as it's after the house in-service date. Here are the different scenarios for reporting 2025 office use percent. House Acquired House Placed In Service For Business Use Prior Use % Prior Depreciation Of House 2025 Use % Depreciation Allowed 1 12/31/24 12/31/24 0% $0 10% $1,001 2 12/31/04 12/31/24 0% $0 10% $1,001 3 12/31/24 12/31/24 0% $0 10% $1,001 4 12/31/14 12/31/14 0% $0 10% $1,347 5 12/31/04 12/31/04 0% $0 10% $2,057 6 12/31/94 12/31/94 0% $0 10% $4,353 7 12/31/84 12/31/84 0% $0 10% $0* 8 12/31/04 12/31/04 10% $20,042 15% $2,029 9 12/31/04 12/31/04 10% $20,042 10% $1,000 10 12/31/04 12/31/04 10% $20,042 9% $794 11 12/31/04 12/31/04 10% $20,042 8% $589 12 12/31/04 12/31/04 10% $20,042 7% $383 13 12/31/04 12/31/04 10% $20,042 6% $177 14 12/31/04 12/31/04 10% $20,042 0%-5% $0 * fully depreciated For the dates involved, $20,042 is the historical depreciation TurboTax itself suggests for the 2004-2024 time period. You can see that TurboTax gives us what we expect if we keep the office use percent steady the entire time after the house is placed in service for business use, but the depreciation allowed swings wildly if that use percent changes. For the specific scenario affecting me, note that after 20 years at 10% usage, a drop to 5% usage disallows all additional depreciation. For the alternate case - which is far worse - look specifically at rows 3-6: the same house with no depreciation ever taken, placed in service at varying points in the past, produces wildly different deductions depending on how close we are to the end of the 39-year life. At ~20 years in, TurboTax allows roughly 2x the straight-line amount: $2,057 at 10% use instead of the $1,000 the form's own formula would produce. At ~30 years it has roughly doubled again to $4,353. And then it doubles again in ~4.5 more years. And again in ~2 years after that. In the final year of the 39-year life, it approaches $39,000 - the entire 10% share of the home's basis, consumed in a single year. I can't get TurboTax to emit these final numbers directly because nonresidential real property placed in service before May 13, 1993 used a 31.5-year schedule rather than 39. I'm aware that depreciation "allowed or allowable" gets recaptured when you sell, but that seems like a disposition issue -- it shouldn't govern current-year deductions.