Partial rental property depreciation

[javiers_rog]

In 2019, my father gifted me our family house. I started renting half of the house in 2020 and I live in the other half. Turbo tax is automatically taking half of everything I enter (mortgage, taxes, utilities) when calculating expenses and it all makes sense to me. However, I am having trouble understanding how to depreciate for a new rental.

It asks for the Donor's Basis and I entered the full price my father bought the home in 2005. At the end, it gives me my depreciation deduction but it seems too high to me. Isn't Turbo Tax supposed to automatically take half of the depreciation deduction since I only rent half the house? It seems it is calculating it based on the full price.

I've tried talking to 3 specialists already but none can give me a clear answer. I'd appreciate the help 🙂

[AnnetteB6]

You have the correct idea regarding the depreciation.  If you are renting half of the house, then only half of the house should be depreciated.  However, that is not one of the items that TurboTax will calculate for you.

To verify what is going on, go to the Assets/Depreciation section of your Rental Income and Expenses.  When you see the Asset Summary, edit the entry for the house itself.  Without making changes, you can go through this section to the end where you can select to see a detailed summary of the depreciation calculation.  You should be able to confirm that the full cost basis is being used and the house shows 100% business use.  

Click through the rest of this section until you go back to the area where you can Edit the entry again.  

As you go through each screen, pay close attention to the messaging that you see.  Look for the screen that says 'Tell Us About This Rental Asset'.  There may be a message on that screen that tells you to enter only the rental percentage of the asset for depreciation.  That means that if you are renting half of the house, you would enter half of the cost basis.

[javiers_rog]

Thanks Annette. I followed your instructions. The summary I see is not very detailed but it does seem to be taking depreciation based on the full home instead of half. Also, when I go back, I've read all the messages, but I do not see any messages or guidance telling me to only enter half the cost of the house. There is not a screen that says Tell Us About This Rental Asset.

[ColeenD3]

The screen you want to start everything off correctly would be some version of this one. They appear differently in Desktop and Online. You would choose Multi-family. On the following screen, choose, "Rented a unit in a multi-unit where you live."

[javiers_rog]

Thanks Colleen. I did enter all that information correctly at the beginning. Everything in my rental property info screen seems right. It's calculating the correct expenses too (50%). It just gets confusing when it gets to the "Assets - New Rental Property" part.