I have a multiunit bldg. 2 rental 1 owner. I enter total expenses. TurboTax allocates. EXCEPT depreciation shows total. Since this calculated , I can not enter manually

[sfshore2]

How can I get depreciation expense to show 2/3 of total like the other expenses?  There is a question that says Percentage of time the property was used as a business in 2018 which is not the same as percentage of the property that was used as a business If I change this from 100% to  67%  ( 2 out of 3 apartmments) my annual depreciation expense drops from  $12,500  to $800  so I don;t think this is right

[TaxGuyBill]

Yes, you can either enter the full Basis with 66.67% business usage, or enter 66.67% of the total Basis with 100% business usage.

As for why it drops that much:  (1)  Is that the number actually showing up on Line 18 of Schedule E?  (2)  Was this property always used 66.67% of the time for business?  Or did it used to be 100% for many years and now it is 66.67%

[sfshore2]

It was 100% for many years just became 66.67 this year but this is the first year using turbotax

[TaxGuyBill · Accepted solution]

I would treat it as two (or three) separate rental properties.

Enter one with 2/3 of the Basis (or two assets with 1/3 of the Basis) for the existing rentals.

Then another one with 1/3 of the Basis, then show it was converted to personal use on whatever date it was no longer a rental.

TurboTax uses the mathematical method of depreciation, and when you change business percentages like that it gives weird results like you saw.  Treating it as separate rental properties will avoid that.

Just keep in mind that whenever the building is sold, you will need to account for the depreciation that was claimed on your personal unit when it was a rental property.

[mbardshore]

thanks   This makes sense. I have owned the property for 18 years  So when you say 2/3 and 1/3 of basis, this means I am still going back to the original basis (even though I have already taken depreciation)  and  Turbo tax will recalculate as if it had been two properties all along correct?   And regarding your selling comment, my understanding is that when I sell I would pay depreciation recapture on all 3 units from the day I bought the building ( regardless of whether I have taken depreciation of not)  Is this also correct? Thanks for your help

[TaxGuyBill]

Yes.  Use the original "placed in service" date and it should be fine.  If possible, also enter 2/3 and 1/3 of the "prior depreciation".

Yes, there will be "Unrecaptured Section 1250 Gain" from the depreciation for all three units when it is sold.  There won't be any additional depreciation on your personal unit once it became a non-rental unit.

[mbardshore]

sorry to be a bother here but this is the confusing part"  here will be "Unrecaptured Section 1250 Gain" from the depreciation for all three units when it is sold.  There won't be any additional depreciation on your personal unit once it became a non-rental unit."  When the building is sold , I pay recapture gain on the depreciation of the entire building since purchase OR I figure out which years one unit was owner occupied and pay recapture on that unit only for the years it was not owner occupied?  Sale may soon as I am retiring this year

[TaxGuyBill]

Sort of both, but I think it would be easier to say the second one.

You are not eligible to claim depreciation for your personal-use property.  So although you will be paying tax on the depreciation of the entire building since purchase, the depreciation in the current years is LESS than it was in prior years because it is partially your personal-use property.  So it is only based on the amount of depreciation that was actually taken (assuming you have always properly claimed depreciation in the past).

Does that make sense?

[mbardshore]

it makes sense. I've owned the building 27 years   Big gain.  it was owner occupied first, then not owner occupied and just this year owner occupied again.  When it was first owner occupied I didn't understand about depreciation and did not take it. But I assume that when I sell it I calculate what I should have taken as depreciation, even if I did not take it, with the understanding that some years it  will be 100% and other year it will be 67%

[TaxGuyBill]

Yes, that is correct.

[sfshore2]

Thank you