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d-schwane
New Member

How does one stop depreciation from calculating in TurboTax in the year of disposal of a rental property?

I believe a taxpayer can either take depreciation in the year of disposal or not take it for purposes of calculating gain on disposition.
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1 Reply
MindyB
Employee Tax Expert

How does one stop depreciation from calculating in TurboTax in the year of disposal of a rental property?

TurboTax will automatically stop depreciating property in the year of sale. ‌For residential rental property, it is depreciated using what is called the mid-month convention.‌ That means, no matter what day of the month you bought or sold the rental, you will get one-half of a month of depreciation.  For example, if you sold a rental home on February 1st, in the year of sale you will take 1.5 months of depreciation. 

 

When computing a gain/loss you compute depreciation recapture, by adding back depreciation "allowed or allowable." Therefore, since you would have been allowed to depreciate your property in the final year, electing out of the depreciation won't result in favorable tax treatment — you would miss out on the expense, and still have to add it back.

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