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newfound
Level 2

How to calculate cumulative depreciation from form 4562? I see there is prior year and current depreciation. Do I simply add that up to get the total depreciation?

Just need confirmation that the total amount of depreciation on a rental property should be obtained by adding current year depreciation and prior year depreciation from form 4562?
Thanks!
5 Replies
Mike9241
Level 6

How to calculate cumulative depreciation from form 4562? I see there is prior year and current depreciation. Do I simply add that up to get the total depreciation?

form 4562 does not show the total depreciation taken in all the prior years, just that year.  if you always used TT the depreciation history for an asset is with it and should be available in forms modes by clicking on the link for the history. The other option if you have the 4562's for all prior years and just that property add up the amounts.  however, TT follows the tax laws and does not produce form 4562 in years where no assets are added. 

 

newfound
Level 2

How to calculate cumulative depreciation from form 4562? I see there is prior year and current depreciation. Do I simply add that up to get the total depreciation?

Sorry, but this is confusing.  The form has columns literally titled current and prior depreciation!  How is this not depreciation from current and accumulated depreciation from prior years? What do those columns mean if not total depreciation?  The prior depreciation column is also way more than I could possibly have taken in one year so I assume it is accumulated depreciation.

 

Also can you give more detail on the history part, I don't understand how to find the form and accumulated depreciation in the manner you suggest.  I always used TT ONLINE for my taxes.  Thanks!

Carl
Level 15

How to calculate cumulative depreciation from form 4562? I see there is prior year and current depreciation. Do I simply add that up to get the total depreciation?

form 4562 does not show the total depreciation taken in all the prior years, just that year.

Not "quite" true. It depends on "which" 4562 you're talking about.

When it comes to rental property, there are two 4562's for each property, and they both print in landscape format. One is titled "Amortization and Depreciation Report" and the other is "Alternative Minimum Tax Depreciation". The one most commonly used in the reference of this post is the first one I mentioned.

If you are reporting the sale of rental property, the total amount of prior depreciation can be determined manally by using the 4562 titled "Depreciation and Amortization Report" from the *last* tax year the property was classified as a rental. Simply add together the amounts in the "prior year depr" column and the "current year depr" column and that will give you the total amount of depreciation taken on that specific asset, up to and include the tax year that form 4562 is for.

If you converted the property to personal use in the same tax year you sold it, (2020 for example) then you "MUST work through the rental property section first, so that the program can *CORRECTLY* figure the amount of the current year's depreciation, based on the date your converted the property to personal use.

 

Typically, there's no need to convert to personal use in the same tax year you sell the property. But if you did not at least "attempt" to rent the property from the time the last renter moved out, until the closing date of the sale, then you'll probably want to convert to personal use if reducing the amount of depreciation recapture would be beneficial.

If the renter moved out in January and you didn't close on the sale until Dec, then I'd covert to personal use with a conversion date in January that's one day after the last renter moved out. I see no need to take depreciation for the entire 2020 tax year, only to have to turn around and just recapture it in that same year.

Whereas if I sold the property within say, 3 months or less of the last renter moving out, then I wouldn't bother with converting it first. I'd just report the sale in the SCH E section of the program.

Now one thing I've not checked yet, is if I can do it all in the SCH E section. In other words, convert to personal use on say 1/31/2020 *and* report the sale in the SCH E section. Don't see any reason why you couldn't do that.But I've not taken the time to confirm the program will "do the math" correctly if you do.

I( already know the program doesn't do the math correctly if your report in the SCH E section and show a gain on some assets (if you have multiple assets listed) and a loss on others. Seems the program just isn't capable of doing the depreciation recapture correctly, on those assets that show a loss, when you did "in fact" sell the entire property at a gain.

 

newfound
Level 2

How to calculate cumulative depreciation from form 4562? I see there is prior year and current depreciation. Do I simply add that up to get the total depreciation?

This is what I was talking about and what I plan to do as I don't want to have to go back through 13 years of taxes to calculate the depreciation!  Thanks 🙂

Carl
Level 15

How to calculate cumulative depreciation from form 4562? I see there is prior year and current depreciation. Do I simply add that up to get the total depreciation?

@newfound a fair warning here.

If you have anything under the heading "AMORTIZATION" in the 4562 description column, you DO NOT include the numbers of those items when figuring total depreciation. Amortized assets are deducted, permanently and forever. Those deductions are not recaptured under any circumstances.

The total total amount amortized deductions have not yet been deducted as of the closing of the sale, then you get to deduct the remaining balance in the tax year of the sale.

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