Tax Year Prior to 2020: Calculate depreciation for rental property?

[DS30]

No but you can use the percentage of land and building to total value listed on your tax bill to allocate the original cost (or lower of cost or FMV of the property if a converted main residence) to the land and townhouse values under the asset section.

[mylikuliku]

@TurboTaxDeeS I'm not sure I understood what you mean above. My townhouse tax bill has both "Land" and "Improvements" assessed values. In this case, is my Cost of Land still zero (since it is a townhouse) or do I actually have to include the Cost of Land? If yes, how do I determine the Cost of Land?

[AnnetteB6]

Use the following steps to enter information about your rental property so that it will be depreciated in your tax return.  These steps assume that you have already entered some information into your return with regard to your rental income and expenses. 

• Starting from the Rental Properties and Royalties or the Business Income and Expenses (Schedule C) selection under income, choose Update or Review to get to the details about your rental or business
• Proceed to the summary page, then Edit your rental property or business name
• Proceed through the questions until you reach the area where you can click Start or Update for the Assets/Depreciation section
• Proceed to the point where you adding an asset on the page titled Describe This Asset
• If you are entering the rental property itself, enter a description or the property address, then choose the first option on the list, Rental Real Estate Property, then click Continue
• On the next page titled, Tell Us a Little More, select Residential Rental Real Estate, then click Continue
• Proceed through the remaining screens entering the details about your property so that depreciation can be calculated 

@al511

[rdl]

Hi, I run a rental business in an LLC with another member with the 50% split. The rental income and expenses, including the property tax, are handled in the LLC's bank account, but the rental property is still under my name. In that case, do I take the rental property depreciation in my LLC business tax form or do I take it in my personal tax form? Does it matter where the depreciationi  is recorded? Also does it impact the 20% QBI deduction amount? Any help is appreciated. Thanks

[Artist77]

turbo tax is giving me a very high depreciation more than twice the year before

[MaryK4]

You will want to report the depreciation on the LLC Partnership(?) return.  Even though the property is still in your name, it can be a capital contribution to the partnership- although you may want to see if you are required or if there are benefits to changing the property to the LLC.  (This is beyond the scope of the tax advice we can give here).

@rdl

[rdl]

Thanks for the reply. Correct, I would file LLC partnership tax. Changing the ownership title is not an option for me because it will trigger a property reassessment in CA and increase the property tax. Do you have any reference doc or inline resource that says it's OK to take depreciation on my business tax even if the title is under an individual?

[paul62]

This is a very informative answer but I have a slightly different question and that is, how do I determine depreciable basis for a property I used as a full time residence and converted it to a rental property simultaneously transferring the deed to a one-person LLC (me).  I purchased the property in 2018 for $500,000 and used it as my residence.  In 2019, I converted it to a rental property and transferred it to an LLC.  The FMV of the property at the time it became a rental unit was $480,000.  The latest tax assessment values the land at $50,000.  Is the "depreciable value" the purchase price of $500,000 (minus the land, $50,000) or the FMV in 2019 ($480,000 minus the land)?  Or something different.  HELP!!!

[ColeenD3]

@paul62

For converted property, the basis for depreciation is the lower of adjusted basis or FMV at the time of the conversion. So in your case, it is the FMV. Either way, you must subtract the land value.

[lam122]

What is 'improvement value.' Also I keep getting a message saying my deprecation value is $0 but that does not seem right. It is a new condo. 

[DeanM15]

The "improvement value" is the value of the improvements built on the land. Or the total value of your house minus the land value.

You are asked for the land value in the rental section of TurboTax. This is then separated from the total value you entered so that the improvements can be depreciated. Land can not be depreciated.

The depreciation value of your condo should not be $0. I would recheck the figures you entered when you put the condo in the Asset section. Typically, a condo has no land value, so you would put a $0 in that box.

@lam122

[adh504]

To be clear, "Cost -  generally what you paid" means the cost of the house and the land together, right? I am not supposed to subtract land from the purchase price since turbotax will do this for me?

[VictorW9]

Of course, you will have to tell Turbo Tax the land portion of the house, otherwise TurboTax wouldn't know what to deduct from the purchase price of the home. 

[pixelrogue1]

This is a great post, and great informative dialog in the thread.

I purchased an investment property at the end of 2019, which was not rented until 2020. There are a number of expenses/improvements that are to be capitalized on the 2019 return and I am looking for instructions on the capitalization process. Thoughts?

If you seek additional context, thread is located:
https://ttlc.intuit.com/community/taxes/discussion/re-purchased-new-construction-home-investment-pro...

[pixelrogue1]

Appreciate the walkthrough below.

• When entering the price of the rental property, are you including the final number on the settlement sheet (inclusive of all fees,) or price of the house and enter fees in different areas? 
  TT screen states right on it to include fees such as legal to obtain asset, yet other TT references entering points as a separate depreciable asset? 
  
  
• Condo, so now sure how (or if it is possible) to break out cost of land itself. Other options?