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lepetitmoulin
Level 1

Prorating depreciation

As far as I understand it, the depreciation expense must be prorated based on days of rental use and personal use. However, TurboTax does not want to automatically make this calculation (it is giving me full year's depreciation), and it makes me question whether I am doing it correctly.

 

I rented a property from the beginning of 2019 until July 2019 (186 fair rental days), after which the apartment was vacant (not available for rent, but no personal use), until the final 10 days of 2019 when I used it for personal use. So it would seem to me that I would be able to claim (186/196) of the full depreciation for the year, but TurboTax is having me manually override, as it wants to give me 100% of the depreciation for the year. Am I missing something here ?

6 Replies
AlexanderS08
Expert Alumni

Prorating depreciation

Because you owned the rental property all year ("from the beginning of 2019"), the calculation for depreciation allocation is (196-10 personal use days)/196, or 186/196.

 

You should not manually override the depreciation entry. TurboTax will automatically calculate the correct amount once you have entered all the information into the Rental Property section of the software. 

 

[Edited 1/22/2020 | 3:17 PST]

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AmeliesUncle
Level 13

Prorating depreciation

I am assuming this was NOT fully "converted" back to 100% personal use, right?  It remains a home for BOTH personal and rental use, right?

 

If I remember correctly, TurboTax does NOT prorate the depreciation like that, and you need to MANUALLY do it when you go through the "Assets" for depreciation.

 

As you say, the IRS method will prorate things 186/196.  If you were to select the Tax Court Method, it would prorate things 186/365.  Although that method can be beneficial in some situations, in your case that is not a great idea so you will want to stick with the IRS Method.

AlexanderS08
Expert Alumni

Prorating depreciation

Per IRS Publication 527 which has detailed information on Depreciation for rental properties, 186 days out of 196 is the relevant allocation.

 

On Page 17 of the Publication, under "Dividing Expenses" the IRS states:

 

"Any day that the unit is available for rent but not actually rented isn’t a day of rental use."

Accordingly, 186/196 is the appropriate percentage to allocate.

 

@lepetitmoulin

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lepetitmoulin
Level 1

Prorating depreciation

For me, the confusion issued from one of the TurboTax software forms that asked for "Percentage of time I used this item for business in 2019" (in the Asset Summary, within depreciation). By default, 100.00% was entered (although I had already entered rental days and personal days earlier). Since I did use the property for personal days, I deleted the 100.00% default entry and entered 94.9% (186/196). I am guessing that this is correct, since it seems that if I enter 100%, it gives me the whole year's depreciation.

AmeliesUncle
Level 13

Prorating depreciation

Yes.  As I said above, TurboTax does NOT prorate the depreciation, and you need to manually enter it in the "Assets" section.

ThomasM125
Employee Tax Expert

Prorating depreciation

There is a screen in the asset entry part of TurboTax that says "Tell Us More About This Rental Asset" on which there is a question "Have you used this item 100% for this business since you acquired it?". If you answer "No" to that question, you will be prompted to enter the date you started using it for business and the percentage of time you used it for business during the year.

 

The percentage you enter in that response will determine what portion of the yearly depreciation is allowed for that year.

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