Depreciation on rental property

[Samantha333]

Hello,

I only learned that I could use depreciation on my rental property last year after having the property for a while. I  used turbo tax again this year however I cannot locate where I can enter this. I see it on my tax return last year however I cannot locate where to put it on for 2023.  Thanks for any help in advance 🙂 

[Anonymous_]

You're going to need a tax professional to prepare and file Form 3115 and make an adjustment for the foregone depreciation deductions if you did not take any for the preceding two tax years. 

See https://www.irs.gov/instructions/i3115#en_US_202212_publink100035791

[LeticiaF1]

If you already entered the depreciation last year, the program will automatically carry it forward.  If you would like to review the return and make sure it is there, you can view Form 4562 (the form used to calculate depreciation).

You can view your entire return or just your 1040 form before you e-file:

1. Sign in to your TurboTax account.
2. Open or continue your return.
3. Select Tax Tools from the menu (if you don't see this, select the menu icon in the upper-left corner).
4. With the Tax Tools menu open, you can then:
   • Preview your entire return: Select Print Center and then Print, save or preview this year's return (you may be asked to register or pay first).
   • View only your 1040 form: Select Tools. Next, select View Tax Summary in the pop-up, then Preview my 1040 in the left menu.

As tagteam mentioned, you need to go back and review previous years where you did not claim depreciation.  There are two ways to correct this:

1. File an amended return: This only works if you didn’t deduct depreciation on your rental assets for one year. Go back and amend the return to reflect the missed depreciation. Note: You can only go back three years to claim a possible refund for missed depreciation.
2. Adopt a change in accounting method: This option allows you to go back as far as you need. Adjust your current year's tax return to expense the missing depreciation.
   • Why am I adopting a change in accounting method? Not claiming depreciation in two or more years indicates that you've chosen an accounting method without depreciation. In this case, you must now elect to change your accounting method to include depreciation.

For more details and to find out how to change your accounting method, click here.  

@Samantha333 

[Anonymous_]

Unfortunately, the TurboTax Help article is not entirely accurate. 

If a taxpayer uses the same impermissible method of determining depreciation in two or more consecutively filed tax returns, amended returns are not allowed.

See https://www.irs.gov/publications/p946#en_US_2022_publink1000107386

Rather, a Section 481(a) adjustment must be made on Form 3115.