How do i enter depreciation for property that was part time rented then later full time?

[horbie21]

My home was partially rented then full time rented.  It is not straight line depreciation. However, when entering into the form, the depreciation calculation is showing more than I should be getting. How do I adjust this calculation?

[Carl]

For the sake of simplicity and hoping you find it useful, I'll provide you a simple example.

If you were renting out 50% of your house over the last few years, and in 2020 you started renting out the other half, here's the simplest way to do this.

-Do NOTHING with the current entries you have in the assets/depreciation section. Just leave them alone.

-Enter a completely new asset for the other 50% with an "in service" date being the date you started renting out that other 50% (meaning you rented out the entire property effective on the date you started renting out the other half - thus making the property a 100% rental property.)

Would you like other examples to compare? If yes, then I need to know how you presently have it set up in TurboTax.

 - Did you enter the asset as 100% rental property with 100% business use, and just enter the percentage of your expenses based on the percentage of your property that is classified as a rental?

 - Maybe you entered the property with the selection of "I rent out a part of my home" and entered total actual expenses - letting the program "do the math" for you to determine how much of each expense was allowed on SCH E?

[horbie21]

Thank you for your help and detail.

Yes, I filled out all the fields but it was overcompensating for depreciation.  I rented my house out part time many years ago but only started full-time in 2016.  I understand I can manipulate the numbers to get the right depreciation amounts (prior last year and the year before) but I don't want to do that, as it will make it difficult for next year.

Yes, I entered the asset as 100% rental property with 100% business use.  Yes, I let the program 'do the math'.  TurboTax informed me that I cannot manually manipulate the depreciation in the online version, only in the desktop version.

[Critter-3]

The only option you really have is what was already suggested.  You leave the prior year asset alone and add in the rest of the home as a new asset.  Then going forward  you yourself will need to calculate the division of the common expenses between the "properties"  ... this is common when you have a duplex where the owner rents one side and lives in the other and then moves out.  

[Carl]

but only started full-time in 2016.

So how did you deal with this on the 2016, 2017, 2018 and 2019 returns?

Did you also use the online version of the program for those years?

With the online version of 2020, you "might" have two choices here. But it depends on how you dealt with it on the 2016-2019 returns, and weather or not you used the online version of TurboTax for those years.

[horbie21]

I’m prior years, an accountant did my taxes. I am trying to do them myself this year using TurboTax.

[Carl]

Okay. So I assume you have a hard copy of the 2019 tax return.

How are the assets listed/reported on the IRS Form 4562 in the 2019 tax return?

Now let me clarify so you look at the correct form 4562. There are a total of 3 of those forms in the package, and while they have the same form number, they serve different purposes.

First there's the one that prints in portrait format. It's the one that actually gets filed with the return, and only if there's been a change from the previous year. If you don't have this particular one in the package, that would be expected if there was no changes to it in 2019, from the 2018 tax return.

Then there are two more form 4562's and both of them print in landscape format. One is titled "Depreciation and Amortization Report" and the other is "Alternative Minimum Tax Depreciation".

I am referring to the one that prints in landscape format and titled "Depreciation and Amortization Report".

[Critter-3]

If you have depreciation worksheets from the past then you use them  to make the current year entries in the TT program.   If you don't have the worksheet then get them from the CPA you used last year ... they must provide you with a complete copy of your return which includes the worksheets.   Some do not do so you are forced to return to them ... I have always thought it to be a bit underhanded.  

[horbie21]

Yes I have a hard copy of 2019, which includes one in portrait and the listings in landscape. In landscape, the assets are listed separately on the form. I am using this information while inputting the data. I only started renting the home full time midway through 2016. Prior to then it was part time. Thus, I was not able to take full depreciation on the property. I not have the desktop software and will aim to get this processed correctly. Thank you!