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