Why sign in to the Community?

  • Submit a question
  • Check your notifications
Sign in to the Community or Sign in to TurboTax and start working on your taxes
Level 1
posted Jan 26, 2022 9:39:15 PM

Partial Depreciation based on Sq Footage (Owner Occupied)

I bought a property last year, my primary residence, and immediately started renting out 2 of the 3 bedrooms. Those bedrooms, exclusively rented out, make up 20% of the overall square footage.

 

In TurboTax, it's correctly splitting my Schedule A & E interest and taxes, but it is NOT prorating my depreciation.

It shows $8,000 depreciation every year, even though only 20% of my home is rented out. 

If I change the rental use percentage to 100%, the depreciation calculation doesn't change. 

 

Is this a bug, or do I misunderstand the tax code?

 

To work around this, I could in theory prorate the asset price itself, BUT the next year I may rent out more or fewer rooms than in 2021, so I'm not sure if I can "edit" the cost basis later. It feels sketchy to put in prorated details for "Cost of Land" "Recording fees" etc.  Can I? Is this what I should do? Can I edit it next year if I rent it all out, or less of it?

I checked

  • In depreciable assets: "Yes I have always used this item 100% for business"
    • (since I have always rented rooms out as long as I've owned it.)
    • The No option requires a date, which isn't applicable since I've always been here.
  • Property profile: "I rent out part of my home"
  • Property profile: "2021 was the first year I rented this property"
  • Property profile: "Yes this property was rented all year" (at fair rental price)
  • Property profile: "Yes i will enter the total amounts and let turbotax do the math."
  • Property profile: "Rental use percentage: 20%"
  • Property profile: Yes I am an active participant
  •  

 

Sources: https://finance.zacks.com/owneroccupied-tax-deduction-8361.html

 

 

0 1 571
1 Replies
Level 15
Jan 26, 2022 9:53:18 PM

we can't see what you did.  the likely issue is that you entered the full cost of the house so you must indicate business use of 20%  on the asset entry worksheet. (TurboTax does not use the % of business use for depreciation expense)   and don't forget to do a land allocation