If my rental's business use percentage goes from 100% to 50% on 8/1/2024, then how can I adjust my rental asset's depreciation for this?

[eric-l-hill]

I've seen community comments implying I should close out my original property asset via "Special Handling". Then create a new asset that is 50% business use. But I'm worried this will reset the 27.5 depreciation "clock". Alternatively, it looks like I can edit the original assets Date and Business Percent, but changing the Date to 8/1 + business percent to 50% seems to ignore depreciation I should be getting from before that date.

[MaryK4]

To adjust your rental depreciation from 100% to 50%, you will create the new asset and use the amount of depreciation remaining after you enter the partial-year 100% amount as the depreciable basis.  TurboTax does not handle this special handling, so if you cannot make the adjustments, you may want to use the Live Full Service.  

[eric-l-hill]

Thank-you for the response.  I'll try to use your advice and subtract the depreciation for the 100% rental for 2024 from the staring basis for a new asset at 50% business use for 2024.

However, I feel like this turbo tax method for adjusting rental business use percentage will restart my asset's 27.5 year depreciation cycle which I don't know is technically correct with IRS.  If I changed business use every year, I'd never be done depreciating, right?

Can you clarify if this method to adjust business use percentage in turbo tax method restarts the depreciation cycle, and if so, is that OK with the IRS?

[MaryK4]

Yes, TurboTax is not programmed to do the exact adjustment you are requesting.  You can use the workaround knowing you have to keep track because of the adjustment because TurboTax does the calculation in the background to get the correct amount reported to the IRS.  The main thing that is reported to the IRS is the current year depreciation on Form 4562, but the important information is on the Depreciation Report.  @eric-l-hill