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

[chautktran]

Where and how can I calculate depreciation expense for rental properties?

[anderjoe5]

I didn't use turbotax last year. Isn't there a way to just enter depreciation without having to recalculate depreciation on property I bought 14 years ago?

[stacysmomstl]

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[retire2sun]

I am not using turbo this year but my CPA needs to know the depreciation schedule turbo used on my Arizona house and Colorado house were do I find it?

[DS30]

Depreciable basis : Generally, depreciation on your rental property is the based on the original cost of the rental asset less the value of the land (because land is not depreciable). The original cost can include various expenses related to the purchase of the property. If you make a capital improvement to the rental property, you will depreciate it using the same useful life of the underlying property. If you don't know the original house and land separate costs, you can use the percentage of house and land to total value listed on your property tax bill to allocate the original cost.

So for example, if you bought a rental property (house and lot) for $148,000, had capitalized purchasing expenses of $2,000 and the cost allocated to the land part of the purchase was $50,000, then your depreciable basis in your rental property is $100,000 ($148,000 + $2,000 - $50,000).

Residential real estate is depreciated over a 27.5 year life on a straight-line basis and used a mid-month conversion (this means that for the month placed in service, no matter what day during the month, you will only get a half of month worth of depreciation for this first month).

Click for more information about depreciation on rental property

You need to enter your rental property as an asset under the asset section of rental properties.

To enter this transaction in TurboTax, log into your tax return and type "rental (schedule e)" in the search bar then select "jump to rental (schedule e)", TurboTax will guide you in entering this information

Alternatively, To enter this transaction in TurboTax Online or Desktop, please follow these steps:

1. Once you are in your tax return, click on the “Federal Taxes” tab ("Business" tab in TurboTax Home & Business)
2. Next click on “Wages & Income” ("Business Income and Expense" in TurboTax Home & Business)
3. Next click on “I’ll choose what I work on”
4. Scroll down the screen until to come to the section “Rental Properties and Royalties”
5. Choose “Rental Properties and Royalties” and select “start’ (or “update” is you have already worked on this section)

Enter your rental property information through the TurboTax guided questions (or choose edit rental property if property is already listed) until you come to a screen that is titled, Your "rental property name" rental summary. You will enter your rental property house here under "assets/depreciation".

• Under the asset/depreciation section - select start
• Select "yes" to "Do you have assets for this property that can be depreciated?
• About 3 screens in, you will enter the house as an asset here. This is where your enter all your rental assets (including capital improvements) 
• For the rental house (or any capital improvements), you will select  "Rental real estate property"
• Then for the rental house, select "Residential Rental Real Estate"
• On the next screen, you will enter information about your Rental property asset including:
• Property description - usually street address (type of capital improvement)
• Cost - generally what you paid (if this is a conversion of your primary residence, then you would use the lesser of FMV at time of conversion or cost.)
• Cost of Land - If cost, as listed above, includes land, put the total amount of land cost here (land is not a depreciable asset)
• Date purchased or acquired - this is the original date of purchase or acquisition of the rental house.
• On the next screen report purchased new or sold in current year and your business use of the property since acquisition.
• You will then get a screen that will confirm prior year deprecation (If asset is over one year old) Just remember that the IRS assumes that you have taken the correct amount of deprecation on your rental asset regardless of if you did or did not). If you change this amount, TurboTax will calculate a new straight line depreciation amount using the new basis information (cost less prior year depreciation) over the assets remaining life.
• On screen titled "special handling required?" - select "no"
• Then you will get an asset summary page showing current year's deprecation. If you select show detail you can review your entry details.
• You can add additional rental assets on the next screen by selecting "add an asset".

Here is a link that can provide you with helpful information related to your rental property 

TurboTax - Tips on Real Estate Taxes and Real Property 

[DS30]

Please see undated answer including additional screenshots.

[mylikuliku]

@TurboTaxDeeS I turn my primary home into rental home in July 2013 and have been using Turbo Tax to file my taxes for 2013, 2014 and now 2015 (Home and Business version). Under "Review Information" for my rental property in 2015 Turbo Tax, I have the "Date" where the property first turned into Rental i.e., 7/4/2013, "Asset Type" to be I-Residential rental real estate, "Cost" was the purchased price of the property when I bought it in May 2007 ($825K). I want to check if this is the correct value I should put under "Cost"? Or it should be the FMV of the property in 2015?

Under "Land", I have $303,500. I can't remember where is value coming from. My property is a Townhouse/Condo. I suspect this amount is coming from the Property Tax document back in 2013 when I first entered into Turbo Tax. My question, is this the right way of doing it?

Finally, I have "Prior Depreciation" to be $23,436. Again, I am not sure how this is being calculated. Please advise.

My Business % this year (2015) is still 100%.

[DS30]

Yes. Cost is the original value of the property when originally purchased (unless the cost was more than the FMV at time of conversion, then you use the FMV). Land portion would be listed separately.

If you are trying to claim the home gain exclusion on this converted rental property, you will need to get all the rental assets to report no gain or loss (you may have to manipulate the sales amounts to get these assets to have no gain or loss).  You will then take all prior depreciation (this amount will be generated by TurboTax if you used TurboTax for the entire time this was a rental) and the current year depreciation and add these amounts to get a total for depreciation on this rental.

Now you will need to enter this information under the sale of home section. If you meet the home gain exclusion, the only amount that you will have to pay any capital gains tax on is the recapture of depreciation from the time you used the property as a rental (referred to as a Section 1250 recapture amount). (Remember the IRS will assume that you claimed the correct amount of depreciation every year—this is true regardless of whether you actually claimed any depreciation on your tax return).

To enter the sale of your home in TurboTax Online or Desktop, please follow these steps:
1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
2. Next click on “Wages & Income” ("Personal Income" in TurboTax Home & Business)
3. Next click on “I’ll choose what I work on”
4. Scroll down the screen until to come to the section “Less Common Income”
5. Choose “Sale of Home (gain or loss)” and select “start’
6. You will want to use the "Easy Guide" to determine the adjusted basis on this home 
Say "yes" that you sold your main home and TurboTax will guide you on entering this information.  You will need:
• The date you sold your home and the selling price (from your closing statement)
• The date you bought your home and the purchase price (from your closing statement)
• The cost of any major improvements you made, so we can deduct them for you
• Form 1099-C if you sold your home at a loss (short sale)

[mylikuliku]

@TurboTaxDeeS I actually didn't sell my rental house yet. So, do I need to edit the Cost, Land and Depreciation amount of my rental property? The numbers that I stated above are automatically generated in TT from previous years I believe. For example, the depreciation value of $23,436 is automatically generated.

[DS30]

No. Since this information was carried over from a prior year, the cost and land values will stay the same as when you entered them originally (not FMV for 2015). Additionally, the accumulated (or prior year) depreciation amount will also be the correct amount that was allowed on your prior year tax returns.

[mylikuliku]

@TurboTaxDeeS In short, I don't have to do anything in the Assets/Depreciation section since it will be taken care of by TT, correct?

[DS30]

Correct (until you sell the property or add a capital improvement or other depreciable asset).

[mylikuliku]

@TurboTaxDeeS When I checked the Asset Summary under Rental Property (screenshot #2), I don't have the line that shows the value of "Cost of Land". I only have Cost/Cost Basis. Is it because my property is a townhouse?

[DS30]

Yes, if you did not put an amount for land cost under the asset section for this asset (because it was a townhome), then there would be no land cost on this report.

[mylikuliku]

@TurboTaxDeeS Despite my property is a townhouse, the property tax bill send to me have the Land Value and the Building Value. Can't I just use the Building Value on the tax bill for the depreciation calculation?