Prior Year's Depreciation Amount on our condo

[dwestrich60]

I am filing our 2018 Income Taxes and on the CONFIRM YOUR DEPRECIATION, Turbo Tax has computed an amount of previous year's depreciation and asks for the amount to be confirmed or revised. I have looked at 2017's filing, Form 4562, and cannot find that amount. Where in my 2017 return would I find $72,783.00? The Work Sheet shows $0.00 prior year's depreciation. Help, I am lost. Thanks.

[Anonymous_]

Did you use TurboTax to prepare and file your 2017 return? If so, can you look at the Depreciation and Amortization Report?

For 2017, that report (which you keep for your records) should have the accumulated (prior to 2017) depreciation as well as the current (2017) depreciation deduction, the total of which would be your previous depreciation for 2018.

[dwestrich60]

Thank you for getting back to me. Yes, I used TurboTax to prepare and file our 2017 Income Tax. I have looked at the Depreciation and Amortization, Form 4562, which I don't think has any entry for previous years. The only lines filled-in on Page 1 of 2 are Line 1 (510,000.), Line 3 (2,030,000.), Line 17 (6,151.), and Line 22 (6,151.). That is the same amount (6,151) shown on TurboTax's program "Your Property Assets" window. When I click on the Edit button, a Review Information window opens that shows a "Prior deprec." amount of 47,450. I have no idea where that number came from. The "Asset Entry Worksheet" also has that figure listed, but shows no method of computing it. There is a reference to an "Asset Life History" which I cannot locate that may shed some light. My question is: My wife acquired this rental property eight years before we married, and I don't know if this property has been properly depreciated by those who did her taxes. While I have done our taxes for several years, I have not questioned the Prior Depreciation amount until now. The "Asset Entry Worksheet" shows a "Recovery period" of 27.5 [years] and "Year of depreciation" of 17 [years] which I think means that there are 10½ years of depreciation remaining on the property, so I would like it to be correct. If you can help, I would greatly appreciate it. Thanks, Dave

[Anonymous_]

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@dwestrich60 wrote:

...The "Asset Entry Worksheet" shows a "Recovery period" of 27.5 [years] and "Year of depreciation" of 17 [years] which I think means that there are 10½ years of depreciation remaining on the property, so I would like it to be correct...

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If possible, it would be optimal if you could locate the prior year returns for your wife in order to simply add the depreciation deductions to arrive at an aggregate. However, that is probably not even a possibility, I would imagine so you will have to presume (and hope) that the deductions were correct.

In that regard, you can enter the basis for depreciation in TurboTax and simply accept the figure that the software returns. One thing to keep in mind is that outside of the first and last year, the depreciation deduction on residential rental property (defaulting to the straight-line method over 27.5 years) is 3.636% of the basis for depreciation (.03636 x basis for depreciation).

[dwestrich60]

Thank you for your reply. You are correct in that it would not be possible to recover tax returns going back to 2001. I appreciate your interest and response.

[Worldtraveler10]

Hi, I have a similar situation like you. Would you mind sharing what you ended up putting in the "Prior deprec" field? Did you put the annual depreciation amount (condo cost/27.5) or keep the system pre-populated amount (the one that you didn't know where it came from)? I tried both, both didn't change the refund amount, but I don't know if the prior deprecation amount will have any impact when I sell my condo in the future. Thanks!

[RobertB4444]

The prior depreciation amount will effect the profit on the sale later.  You should try to be as accurate as possible.  The amount computed by the system should be fine and may reflect the partial year at the beginning.

@Worldtraveler10 

[Worldtraveler10]

Thanks! Do you think it's safer to put the number from last year's Depreciation and Amortization (Form 4562)- Field 17 (MACRS deduction number)? I guess the annual depreciation amount is the same (cost / 27.5)? 

[PatriciaV]

Prior depreciation is cumulative over the life of the asset. If you have a TurboTax Depreciation Report from last year, total the two columns, Current and Prior, to determine the total accumulated depreciation.

As RobertB4444 advised, the calculated amount that TurboTax provides is usually accurate, especially for rental real estate depreciated using straight-line depreciation.

@Worldtraveler10 

[Worldtraveler10]

Hi, I hired an accountant last year, it seems like she used the same amount for the “current” and “prior” depredation fields from last year’s form, which is just cost /27.5 year(not the cumulative amount). That’s why idk if I should do the same this year. You mentioned that it should be total accumulative depreciation. Did it start from where I purchased this condo unit, but not when the condo was built? Appreciate your help!

[ThomasM125]

You should enter the accumulated depreciation and that should start from the day you put the rental property into service. 

[Worldtraveler10]

Thanks!