Need to know how the depreciation was figured by Turbo Tax residential rental

[itzallmyne]

Residential rental cost basis 90544, in service date 01/01/2014.   Was just renting a room 29.7% of property, from 1/2014 thru 4/30/2022.  Depr was 978 for year 9, 27.5 yr MMSL.  Tenant left 4/30/22.  We did total rehab of house, down to studs, new everything.  It was ready for use again on 11/1/2022 at 100% bus use.  Deprec should be 3292 for year, prorated I think, however TT is showing 4235, which is roughly 978 + 3292. Prior depr is 7783.  Why is it giving me this 4235?  I also messed this up when entering, I mistakenly said stopped using for business, now I have an error on the asset worksheet that I can't clear, I will most likely have to delete and reenter the worksheet.  Any help you can give me, thank you so much!

[Anonymous_]

Did you add a second asset? For example, the cost of the total rehab?

[Mike9241]

you don't give us the cost of the rehab and you say 100% business. does that mean it's now commercial rental which has a 39-year depreciable life or is it still residential?  if it's still residential it's depreciated over 27.5 years but you only get 1.5 months depreciation on the rehab cost the first year (mid-month convention) 

 the rehab cost must be entered as another asset.

turbotax does handle depreciation well when use changes

technically on the original cost i think you are entitled to 90544/27.5*.297*10/12)=815 (IRS PUB 946 says depreciation continues if an asset is temporarily idle) +90544/27.5*1*2/12=549

[itzallmyne]

Yes added a second asset, rehab was $40,113 in materials, we did labor ourselves, 27.5 y, MQSL, this year depr 182.  This has nothing to do with original asset, which is residential rental home, no personal use., rented at fair market value.  @Mike9241 , I understand that depreciation continues, I had also figured 1364 for the year for mixed use, however, somewhere I had read that when there is a change in business usage, not change in use, it is still a rental, you depreciate like change started at beginning of the year, and you can take the whole year.  I don't know, I have been trying to read up on this, refering to IRS Code.  The people that write up this stuff are twisted! "If property is in use after 12/31/17 use 30 years, if in use before 01/01/2018 use 40 years????"

SECTION 4. ALTERNATIVE DEPRECIATION SYSTEM UNDER § 168(g)

.01 Recovery period of residential rental property.

(1) In general. The recovery period under the table in § 168(g)(2)(C) is 30 years for residential rental property placed in service by the taxpayer after December 31, 2017, and is 40 years for residential rental property placed in service by the taxpayer before January 1, 2018.

What does this even mean????

Thank you for your reply @Mike9241 .  I appreciate the advise, however maybe this is a programming error in TT?  Still want to know where the 4235 came from.  Could it be that now it's rented at 100%, the program is trying to catch up on depreciation taken in the past?  My  MACRS depr schedule for 100% use shows accumulated depreciation should  be 24694 thru the year 2021, yet actual taken is 7783.  Allowed or allowable?

This should not be either, as depreciation is figured per year.

I also had to reset up the asset because of an error, and it gave me the same result. Still not sure what to do???

Thanks for your reply.

[itzallmyne · Accepted solution]

I sort of figured out how TT was getting to that figure of 4235.  It was not using IRS tables.  In the help section for the asset entry worksheet, for line 10,  if you want to use the IRS MACRS tables, you need to check yes on line 43 to use IRS tables.  You do not adjust your cost basis when figuring out depreciation.  It is basis/27.5, x business %.  I believe the only time you would deduct your depreciation from cost, is to see what your actual basis is when you dispose, abandon, sell, etc, the asset, not when figuring depreciation.

Any how, thought I would follow up on what I found out.  I'm sure I was not the only one having this problem.

Happy tax day to you all!