Foreign rental depreciation
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Level 2

Foreign rental depreciation

I own a condo since 2006 that I used to live in foreign country. Upon arriving US, I converted it to rental property in 2010. Unfortunately, my CPA didn't claim any depreciation on the property on my personal tax return and I just found out I was supposed to claim since 2010.  Since it's in foreign country, 40 year life depreciation will be applied. But I can't figure out how Turbotax calculate the amount of depreciation taken in prior years. My cost basis for building is $257,915. According to my calculation the amount of depreciation taken in prior years should be $57762, but Turbo tax shows $51343. How can I see Turbo tax depreciation schedule? And what could happen if I enter zero for the amount of depreciation taken in prior years?

3 Replies
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Level 15

Foreign rental depreciation


@turtle11 wrote:

Unfortunately, my CPA didn't claim any depreciation on the property on my personal tax return and I just found out I was supposed to claim since 2010. 


Then you need to stop and consult with a tax professional (CPA, EA, etc) to explore filing a Form 3115 to make a Section 481(a) adjustment so that you can claim the foregone (missed) depreciation deductions.

 

See https://www.irs.gov/instructions/i3115#idm140516453720416

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Level 2

Foreign rental depreciation

Thank you for your reply! I agree that should be proper thing to do. However, can I just start to claim depreciation from 2019 with Turbotax? I read somewhere allowable or allowed depreciation will be recaptured upon sale regardless I claimed or not. Also, I think I will have enough foreign tax credit to offset any US tax liability for capital gain from the sale anyway. I have always had enough foreign credit, so never paid extra tax for the rental income on 1040. 

What would be the easiest and most effective tax saving way for me? Any more advice?

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Level 15

Foreign rental depreciation


@turtle11 wrote:

....can I just start to claim depreciation from 2019 with Turbotax? 


No, you cannot. By not claiming any depreciation, you adopted an impermissible method of accounting which, after failing to correct that error for two consecutive tax years, requires filing Form 3115. 

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