Incorrect rental depreciation calculation by TT

[sviyer]

I started renting out my property in Jan 2019, with building cost as 351804. In different years, I had different business use, sometimes 66%, sometimes 44% etc. For 2024, my business use is 33.33%. The online calculator using MACRS and SL, gives me a dep of 4,222. However, TT calculates it as 3575. Does anyone know why? My dep so far is 36673. Even last year, my dep. was incorrectly calculated by TT, but I let it be. I want to get to the bottom of it this year. Thanks!

[PatriciaV]

Have you reviewed the Depreciation section of the Asset Worksheet for this property? This worksheet displays the depreciable basis and the depreciation convention used by TurboTax. 

Note that the program computes depreciable basis by multiplying the cost or basis (Line 4) (less Land - Line 😎 by the percentage of business use (Line 6).

You can also access the Asset Life History table using the QuickZoom link on Line 15 (TurboTax Desktop only).

If you're using TurboTax Desktop, you can access this worksheet using Forms Mode.

For TurboTax Online, see How do I get a PDF of my return?

[sviyer]

Thank you for the answer. I've seen Form 4562 "Depreciation and Amortization report".

The depreciable basis is 117,256, life is 27.5, Method is SL/MM, placed in service on 1 Jan 2019. The depreciation is shown by turbotax to be 3575, which seems wrong. All the calculators (like this: https://goodcalculators.com/macrs-depreciation-calculator/) I've used show it as 4264. 

[Rick19744]

You are correct in the depreciation amount for 2024.

I would recommend you look at the depreciation detail to make sure depreciation has been correct for all prior years as well.

Based on the IRS tables, depreciation should have been:

• Initial year $4,086
• Each subsequent year $4,263 including 2024
• There could be $1 rounding here and there
• Beginning in year 10 and thereafter, it will change by a small amount each year as the percentage is adjusted up and down every other year.

Edit:  Apparently the facts changed significantly from the original question, which is why this response does not agree with subsequent replies.  You can't change the facts of an original question when someone is responding.  The responses then don't make sense!!

[sviyer]

Thanks! It is correct from 2019 to 2021. It went wrong from 2022.

In 2022, it should have been 6395, but instead, it was 6139. (50% business use)

In 2023, it should have been 5684, but instead, it was 5303. (44.4% business use)

(btw, I have different % each year, thats why the amounts are different, but I have accounted for that)

I think I didn't check and just took the default calculation for 2022 and 2023. Now again for 2024, it's different. What should I do? I don't care about the past numbers, should I manually correct it in 2024? Any idea why this is happening and how I can fix it? Is turbotax using the last two years also to calculate? It should not, right? Any way to fix this? Thanks!

[Mike9241]

put simply Turbotax cannot handle varying percentages of business use  

here's an example

assume date placed into service 1/1/2023 

first year businee use

100%

cost 351804

1st year depreciation

351804/27.5 = 12793

1st year you only get 11.5 months not 12 under the mid-month convention for real property

12793 *11.5/12 = 12260 (ok I agree with Turbotax calculation)

2nd year Turbotax computation when business use is 33.33%

351804*.3333333=117268

117268 less 1st year depreciation of 12260 leaves 105008

remaining life 27.5-.958333 (11.5/12) leaves 26.54167 remaining life

117268/26.54167 = 3956 2nd year deptreciation which is totally wrong but this is what TurboTax comes up with (this is what Turbotax comes up with rather than 

351804/27.5*.33333

there's no way to fix this in Turbotax except by overrides

[sviyer]

Thank you for the calculations. So turbotax is using the amount depreciated so far to do its calculations.

I am using the Desktop version. Is there a way I can manually enter it, and let it do all the remaining calculations? Or do I need to do it directly on the form and then change all the calculations myself?

[sviyer]

Hi Mike,

How can I do overrides? I have turbo tax premier.

Thanks!

[DawnC]

Under normal circumstances, you shouldn't have to override anything.   Returns that contain overrides cannot be e-filed and may not be covered under our 100% Accurate Calculation Guarantee.   We're providing these instructions to customers who understand the risks, but wish to proceed anyhow.

1. Switch to entering your info via forms.
2. Right-click the line item value you want to override and select Override (Windows) or choose Override from the Edit menu (Mac).
3. Enter the value; it should turn red, indicating an override.
4. Switch back to the interview by selecting Step-by-Step from the menu.

To undo the override, follow the same directions except choose Cancel Override in Step 2 (Windows) or uncheck Override in the Edit menu (Mac).

When you run the final review, TurboTax will alert you of any overrides in your return.

How do I override (replace) an amount calculated by TurboTax?

[sviyer]

Thank you Dawn. I was able to override on Form 4562 (Depreciation and Amortization report). But it's not letting me override on Form 4562 (AMT Depreciation report). The overide button is greyed out for this? Why is this the case? Why can I not override all fields?

The strategy I took was to increase the business use % in TT to get the correct depreciation, and then to override and change all the % back in the form. This way I have to do minimal work. But it's not letting me override everything. Can you suggest how I can override on Form 4562 (AMT Depreciation report). The overide button is greyed out for this? Im on a Mac. Thanks!

[sviyer]

@DawnC ? Any solution? Why can we not override certain forms?

[sviyer]

Sorry @Rick19744 , I don't understand. What facts changed? Are you saying your answer isn't valid? It agrees with my calculation.

[Rick19744]

The original question / post indicated a cost basis of $117,256 which when multiplied by the IRS table rate provided the $4,263 figure in my reply.

The facts now, indicate a cost basis of $351,804 with varying business use rates; 66%, 44% and 33.33%.  None of this was mentioned in the initial post.

Using the 33.33% does arrive at the $117,256, but nothing in the original post mentioned varying business use until after my original reply.

While the $4,263 may be correct for the 33.33%, the additional facts of varying business use completely changes how someone will respond and the fact that this impacts how TT calculations will be handled....won't be handled automatically.

The issue here is when other parties come to look at the question and answers, the flow doesn't make sense.  The original post should never change; or add "Edit" to the original post.  Or alternatively, edits can be made in subsequent replies, and then that will help those that use the questions and answers for their issue as the flow now makes sense.

[sviyer]

@Rick19744 I'm not sure what you are talking about. This is what my original post says "In different years, I had different business use, sometimes 66%, sometimes 44% etc. For 2024, my business use is 33.33%." Maybe you saw the posts in a different order on your end, but on my end, my first post had that sentence and all other relevant details.

[RobertB4444]

You may not be able to override the AMT amounts.  Unless you have triggered the AMT this probably isn't any big deal.  But that's part of why @DawnC advised you not to override anything at all.  It can lead to some weird entries.

@sviyer