How to calculate cumulative depreciation from form 4562? I see there is prior year and current depreciation. Do I simply add that up to get the total depreciation?

[newfound]

Just need confirmation that the total amount of depreciation on a rental property should be obtained by adding current year depreciation and prior year depreciation from form 4562?
Thanks!

[Mike9241]

form 4562 does not show the total depreciation taken in all the prior years, just that year.  if you always used TT the depreciation history for an asset is with it and should be available in forms modes by clicking on the link for the history. The other option if you have the 4562's for all prior years and just that property add up the amounts.  however, TT follows the tax laws and does not produce form 4562 in years where no assets are added. 

[newfound]

Sorry, but this is confusing.  The form has columns literally titled current and prior depreciation!  How is this not depreciation from current and accumulated depreciation from prior years? What do those columns mean if not total depreciation?  The prior depreciation column is also way more than I could possibly have taken in one year so I assume it is accumulated depreciation.

Also can you give more detail on the history part, I don't understand how to find the form and accumulated depreciation in the manner you suggest.  I always used TT ONLINE for my taxes.  Thanks!

[Carl]

form 4562 does not show the total depreciation taken in all the prior years, just that year.

Not "quite" true. It depends on "which" 4562 you're talking about.

When it comes to rental property, there are two 4562's for each property, and they both print in landscape format. One is titled "Amortization and Depreciation Report" and the other is "Alternative Minimum Tax Depreciation". The one most commonly used in the reference of this post is the first one I mentioned.

If you are reporting the sale of rental property, the total amount of prior depreciation can be determined manally by using the 4562 titled "Depreciation and Amortization Report" from the *last* tax year the property was classified as a rental. Simply add together the amounts in the "prior year depr" column and the "current year depr" column and that will give you the total amount of depreciation taken on that specific asset, up to and include the tax year that form 4562 is for.

If you converted the property to personal use in the same tax year you sold it, (2020 for example) then you "MUST work through the rental property section first, so that the program can *CORRECTLY* figure the amount of the current year's depreciation, based on the date your converted the property to personal use.

Typically, there's no need to convert to personal use in the same tax year you sell the property. But if you did not at least "attempt" to rent the property from the time the last renter moved out, until the closing date of the sale, then you'll probably want to convert to personal use if reducing the amount of depreciation recapture would be beneficial.

If the renter moved out in January and you didn't close on the sale until Dec, then I'd covert to personal use with a conversion date in January that's one day after the last renter moved out. I see no need to take depreciation for the entire 2020 tax year, only to have to turn around and just recapture it in that same year.

Whereas if I sold the property within say, 3 months or less of the last renter moving out, then I wouldn't bother with converting it first. I'd just report the sale in the SCH E section of the program.

Now one thing I've not checked yet, is if I can do it all in the SCH E section. In other words, convert to personal use on say 1/31/2020 *and* report the sale in the SCH E section. Don't see any reason why you couldn't do that.But I've not taken the time to confirm the program will "do the math" correctly if you do.

I( already know the program doesn't do the math correctly if your report in the SCH E section and show a gain on some assets (if you have multiple assets listed) and a loss on others. Seems the program just isn't capable of doing the depreciation recapture correctly, on those assets that show a loss, when you did "in fact" sell the entire property at a gain.

[newfound]

This is what I was talking about and what I plan to do as I don't want to have to go back through 13 years of taxes to calculate the depreciation!  Thanks 🙂

[Carl]

@newfound a fair warning here.

If you have anything under the heading "AMORTIZATION" in the 4562 description column, you DO NOT include the numbers of those items when figuring total depreciation. Amortized assets are deducted, permanently and forever. Those deductions are not recaptured under any circumstances.

The total total amount amortized deductions have not yet been deducted as of the closing of the sale, then you get to deduct the remaining balance in the tax year of the sale.

[rydong1]

Quote from your explanation of this topic:

"the total amount of prior depreciation can be determined manally by using the 4562 titled "Depreciation and Amortization Report" from the *last* tax year the property was classified as a rental. Simply add together the amounts in the "prior year depr" column and the "current year depr" column and that will give you the total amount of depreciation taken on that specific asset, up to and include the tax year that form 4562 is for."

In my case, the property was rental prior to 2019,  in 2019, in 2020 , in 2021 and it is still a rental now in 2022. I did not and have no plan to convert it to personal use in the foreseeable future. In review the just completed 2021 tax return, I observed the following:

Form 4562 "Depreciation and Amortization Report" for Tax Year 2020

Prior Depreciation = 54167, Current Depreciation = 8766

Form 4562 "Depreciation and Amortization Report" for Tax Year 2021

Prior Depreciation = 61484

54167 + 8766 ≠ 61484

(I used TurboTax for both my 2020 and 2021 tax returns, and the Form 4562s for both years were generated by TurboTax)

I have another rental property which has the similar discrepancy in Form 4562s between 2020 and 2021.

Can you explain why such discrepancy?

[leeloo]

Just go to your depreciation worksheet. It is much easier. Add your 2021  depreciation to your prior depreciation

[Carl]

In my case, the property was rental prior to 2019, in 2019, in 2020 , in 2021

Please clarify "prior to 2019".  For example, you purchased the property in 2010 and it was a rental from the time you purchased it in 2010 until 2015. Then from 2015-2019 it was your primary residence or 2nd home. Then in 2019 you converted it back to personal use.

If this type of scenario fits your situation, then it "does" matter.... and it does "not" work the way you may think.

[rydong1]

I purchase the property in July 2008, it was my primary residence 2008 to 2013 when I worked there. I left the state Aug 2013, but the property was not rented out until Jan 2014. (We had an accountant doing our tax since early 2000s to 2019. I looked up those old tax returns he did. We did not do anything in 2013, no Schedule E. I guess that means it was personal use until 12/31/2013). The apartment was first rented out 1/1/2014, and there was a Schedule E in 2014, and every year thereafter. It has been a rental since then, and it still is. There were two or three times during those years that a tenant moved out and it took a few months to find a new tenant, so there were months that I had no rental income from that property, but it was never converted back to personal use. (I cannot use it physically. I am two thousand miles and an ocean away).

In 2020, I decided to do our own tax return myself, using TurboTax. My accountant provided my Form 4562s of Tax Year 2019, the last year he did our tax. I double checked after completing 2020 tax return in TurboTax that Prior Dep (2019) + Curr Dep (2019) = Prior Dep (2020). However, this year it was no longer true.

Did I do something wrong? Or is there more complicated reason behind it?

[Carl]

purchase the property in July 2008, it was my primary residence 2008 to 2013 when I worked there. I left the state Aug 2013, but the property was not rented out until Jan 2014. We did not do anything in 2013, no Schedule E. I guess that means it was personal use until 12/31/2013).

Since it was the first day of the new year in 2014, I"m assuming it was converted to rental on 1/1/2014 based on your statement that there was no SCH E for 2013. No problem there.

The apartment was first rented out 1/1/2014, and there was a Schedule E in 2014, and every year thereafter. It has been a rental since then, and it still is.

I'm with you.

There were two or three times during those years that a tenant moved out and it took a few months to find a new tenant, so there were months that I had no rental income from that property, but it was never converted back to personal use. (I cannot use it physically. I am two thousand miles and an ocean away).

Not a problem. There is no requirement to convert it back to personal use when a tenant moves out, if your intention is to rent the property to another tenant. For the vacant period between tenants, the property remains classified as rental property.

In 2020, I decided to do our own tax return myself, using TurboTax. My accountant provided my Form 4562s of Tax Year 2019, the last year he did our tax.

Still with you, and all looks fine thus far.

I double checked after completing 2020 tax return in TurboTax that Prior Dep (2019) + Curr Dep (2019) = Prior Dep (2020).

Correct. Many folks forget amount the math on the prior year 4562 when figuring prior depreciation for the current year tax return they're working on. In your case, you did the math and thus far, everything appears to be on track correctly.

However, this year it was no longer true.

Why is it no longer true? Did you sell the property in 2021? Did you convert it back to personal use in 2021? So far, I don't see anything wrong. But then, I don't know why things would be "no longer true" for 2021.

If you sold the property, how long after the last renter moved out did you sign the sales contract legally committing you to close on the sale?

If you converted the property back to personal use for whatever reason (I would assume you moved back into it as your primary residence.) then on what date after the last renter moved out did you "officially" stop attempting to rent it out again?

I get the impression you may still own the property, but decided to stop renting it for whatever reason. So let me know the facts and we'll go from there. As stated before, everything seems to be okay at this point.

[rydong1]

First, thank you very much for responding so quickly. 

"However, this year it was no longer true" is related to my original question I asked several days ago, that is, 4 replies ago in this stream. The following (in italic font) is my original question:

In review the just completed 2021 tax return, I observed the following:

Form 4562 "Depreciation and Amortization Report" for Tax Year 2020

Prior Depreciation = 54167, Current Depreciation = 8766

Form 4562 "Depreciation and Amortization Report" for Tax Year 2021

Prior Depreciation = 61484

54167 + 8766 ≠ 61484

(I used TurboTax for both my 2020 and 2021 tax returns, and the Form 4562s for both years were generated by TurboTax)

I have another rental property which has the similar discrepancy in Form 4562s between 2020 and 2021.

Can you explain why such discrepancy?

From my perspective, I am still renting this property, and I have no plan to convert it to personal use or to sell it in the foreseeable future. My concern is the discrepancies in the Form 4562s generated by TurboTax in 2020 and 2021. Was that because I answered some interview questions wrong? Or was there something else affecting the depreciation value?