I sold a rental property in 2016 and did a 1031 exchange purchase of another rental the same year. I think I should be using the cost basis of the original property to calculate depreciation instead of cost of the newer rental?? if so, how to enter it properly including land value?
Yes, you are correct. The property received in the 1031 exchange retains the same cost basis, prior depreciation and continues exactly as it was, including the original date acquired. It is treated this way because you are being allowed to defer most if not all taxable gain on the exchange.
Enter the original cost basis of the property given up including the land, then enter the land in the space for land in the asset. TurboTax will reduce the cost by the land before calculating any depreciation amount for 2023.
When you had the 1031 exchange you may have had additional 'buy-up charges' such as taking over a loan, and/or giving up a loan on the original property.
The basic concept of a 1031 exchange is that the basis of your Old Property rolls over to your New Property. In other words, if you sold your Old Property for $100,000, and bought your New Property for the same, your basis on the New Property would be the same. It makes sense then that your depreciation schedule would be exactly the same, which it is! In other words, you continue your depreciation calculations as if you still own the Old Property (your acquisition date, cost, previous depreciation taken, and remaining un-depreciated basis remain the same).
If you "bought-up" in your exchange (your New Property cost more than you sold your Old for), the answer is easy – you treat the buy up part as you would a new addition to an existing property. In other words, you treat the amount of the buy-up the same as you would the cost of construction, for example, of a garage added to an existing house – the cost is the amount of the buy-up; the date you start depreciating it is the date you purchased the new property; and the depreciation method you use is the method most appropriate for that type of property in the year you bought the New Property (regardless of the method you used for the original house). If you think of it this way, then it's easy, even if your property is a large office building or a more complex purchase.