Depreciation for a rental property with different amounts in differen years via TT

[SupremeMetalTree]

When I moved overseas in 2018 I began renting out my house. The depreciation was approxiately 3,984 per year based on a 27.5 SL method for 2019 and 2020. This tax year 2021, when working on the rental income/expense in TT, I plugged in the same figures (I used the same home and land value), and the depreciation was just over 3,097 or something close. Why is there about a 1k difference this year than in the two previous years I though is should be the same with SL? 

Thanks

[DianeW777]

It should be the same figure for 2021 with the information you provided.  Based on your original depreciation amount I am taking an educated guess that the cost basis being depreciated on the house is approximately $109571. The rate of depreciation using the 27.5 SL is 3.636%.  Double check the figures and the date placed in service. 

The chart is shown below for reference.

[Critter-3]

Did you enter in the prior year depreciation taken correctly ?  That will make a difference. 

[Carl]

Most likely when entering figures in TTX, you entered the wrong amount for "prior years deprecation" already taken.

Take a look at the 2020 (twenty twenty) IRS form 4562 that prints in landscape format, titled "Depreciation and Amortization Report".  You need to add together the amounts in the "prior year depr" column and the "current year depr" column, to get the correct amount of prior year depreciation to enter on your 2020 tax return.

[AmeliesUncle]

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@SupremeMetalTree wrote:

(I used the same home and land value),

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Are you entering the TOTAL cost (building and land combined) and then the land value?  If not, that is how you need to enter it.

[SupremeMetalTree]

Hi,

I am using 108,000 as the cost basis for the house. The 3.636%  puts my depreciation at 3,927, just below what TT calculated last year which was 3,984. When I put the same numbers in property of 108,000 land 27,000 and last year's depreciation, TT says my depreciation is 3,065. I do not understand why, or what I need to do to fix.  

Thanks,

[Carl]

and last year's depreciation

Just to confirm. Maybe last year was the first year you rented it? If not, then you should be entering the total of all prior year's depreciation. On the 2020 return that total would require you to add current and prior together, for the total prior to enter on the 2021 return.

Also check that you are using the correct original in service date as last year. A different in service date will skew things too.

Further things to check.

In In the COST box you enter the total paid for the property

In the COST OF LAND you enter the land value.

The program (not you) will subtract COST OF LAND from COST, to determine the structure value for depreciation.

Make sure those cost entries agree with the prior year return entries too.

[Carl]

I am using 108,000 as the cost basis for the house. The 3.636% puts my depreciation at 3,927, just below what TT calculated last year which was 3,984. When I put the same numbers in property of 108,000 land 27,000 and last year's depreciation,

There's a problem I see right there. *YOU* do not enter the property value. The program will figure that for you. In the COST box, you should be entering the total cost, which with your numbers would be $135,000 in the cost box, and $27,000 in the COST OF LAND box.

The program *not you*, will do the math to get the structure value for depreciation.

[SupremeMetalTree]

Carl,

I followed your direction, put in the cost of 135,000, then entered 27,000 for the land value. Additionally, I added up all the previous year's depreciation. I began renting the property in Aug 2018 so I had a partial year for depreciation then 2019-2021 as full calendar years. I entered this into the box asking for prior depreciation. The program figured my depreciation was 3,919, but close enough to the 3,927 my CPA calculated in a previous year before he retired. So I will go with that number. Thanks for the tips on how to correctly enter the property value and also entering all prior year's depreciation amounts. 

Thanks

[Carl]

The program figured my depreciation was 3,919, but close enough to the 3,927

That's close enough. I think that happens because of rounding either in the TTX program, whatever program was used prior to TTX, or a combination of both.