Hi, I did a cost segregation study, so there is accelerated deprecation. Can you please advise how to reflect the accelerated depreciation in the TurboTax system?

[AliciaP1]

Yes, you would add different assets individually based on the purchase date and when placed in service.  If you are trying to add assets associated with rental activities on your personal return, see Where do I enter income and expenses from a rental property? for details.

@Ru771 

[Scottwang]

After I entered the land and property value. TT automatically depreciated by 27.5 years. How did you get to the page you mentioned?

[Scottwang]

@DianeW777 where in the TT system can I name the 5 year and 15 year bonus depreciation items? When I put in the land value and improvement value, it automatically goes to depreciate by 27.5 years. Thank you for what you do! 

[KrisD15]

Bonus Depreciation can only be taken on assets you add, such as appliances. 

When you first enter a rental, the program will treat the entire home as the rental and depreciate over 27.5 years. 

Real Estate cannot use Bonus Depreciation. 

Land does not get depreciated at all. 

[Scottwang]

@KrisD15 @What about the items that were bought with the house but can be depreciated over 5 years like carpeting and landscaping?

[KrisD15]

If you want to list assets separately, then enter the building and land separately with the lower value. 

For example if you are going to list 10,000 worth of assets on a 300,000 purchase, the land might get 25,000, building 265,000 and then the assets. 

You cannot report so much for the assets that you have nothing left for the house itself. 

Once you enter the house and land, enter each asset you wish to depreciate separately. 

Please be aware that if the rental is generating passive income/loss, you might be limited on the loss you are allowed to claim in the tax year and what you are required to carry-over. 

Also, please be aware that depreciation is recaptured when the rental is sold. 

Bonus depreciation is recaptured when sold OR converted to personal use. 

If you report too low of a cost for the building (basis) when you sell you MIGHT have Depreciation Recapture AND Capital Gain. 

If you list carpet as an asset, when it is replaced you will take the carpet off the books and enter the new floor covering as a new asset. 

[Ru771]

I think it is added under assets when filling in your rental property details. What I did see in here is something called “residential” that is where TT is automatically depreciating the building?? Using SL 27 years.

If I have a cost seg and break individual components out do I delete this line item? I enter the various components eg flooring under the correct 5/15 years etc. Instead? Or do I add them and include this automatically added “residential” line item as well? I don’t want to double dip. Thanks!

[DawnC]

No, don't delete the house/land entry.   All of your asset costs have to total the purchase price.   You need to adjust the basis of the house & land being depreciated over 27 yrs and remove the cost of the assets you have listed individually.    See Kris D15's reply right above your post.   @Ru771 

• A cost segregation study tells you how to segregate specific aspects of any rental property, such as appliances and carpets.   If you made improvements after the purchase, you would automatically segregate them.  If you just bought the building and wish to segregate a specific asset, then you need to determine which they are and enter them separately from the house.
• You just have to find a way to allocate a reasonable amount to each asset and subtract it from the purchase price.  

Cost Segregation 

[MG-FL]

Where is this option in Turbo Tax? I am using TT Home & Business 2022 Desktop version.

[MG-FL]

Where do you input the in Turbo Tax? I brought a property in 2022 and did cost segregation study. I need to input 5 yr, 7 yr, 15 and 39 yr classifications. Thank you.

[RobertB4444]

If the assets that you had in the cost segregation study are all being placed in service this year then you will simply go to the rental real estate section and enter each individual asset one after another until you have entered them all.

If the assets were entered in prior years and you are going into the system in order to segregate previously depreciating assets that requires retroactive changes to assets previously reported on filed tax returns. This is a complicated procedure that should be done with the advice of an experienced tax professional.  TurboTax does not support the procedure.

Your previously filed tax returns will need to be amended or depending on how long ago the building was placed into service. You will likely need to file Form 3115 for a Section 481(a) adjustment (change of accounting method). TurboTax does not include this form.

@MG-FL 

[MG-FL]

@RobertB4444  Thank you. This is a new property I brought in 2022 and first time filing taxes. Thank you, I entered the assets and glad to get  the accelerated deprecation!. Appreciate your help.

[kingcyrus1]

I can't even find where that section is to enter the 5 year or 15 year.  Are you in the rental property section?

[MG-FL]

@kingcyrus1 yes in rental section. I am using TT Desktop version. Delete the depreciation that TT calculated by default. Then add assets, there is no label that says 5yr, 7yr or 15 yr. Assets like furnishing, equipment, machinery, etc. will be depreciated at 5 year, site improvements like signs, pavements, etc. will be classified as 15 yr and so on, TT does this automatically . TT will give an option if you want to take all depreciation in year 1 or spread across 5 or 15 years. Hope this helps.

[kingcyrus1]

Thank you for your reply.  I am using the TT desktop as well.  I followed your suggestion and deleted and added as an asset. But it is still automatically calculating at 39 years. Where is the part where I can change to 5, 7 or 15 year?