Turbo Tax is not figuring my Assets depreciation correctly this year? Why?

[shealeenp]

I acquired an asset on 10/12/2021 and it is 100% business, the program calculates depreciation as if it is only 25% business. When I change the date to 1/1/2021 I get the proper calculation. Seems like I have to put in an incorrect date to get the proper calculation.

Just my experience.

[DoninGA]

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@shealeenp wrote:

I acquired an asset on 10/12/2021 and it is 100% business, the program calculates depreciation as if it is only 25% business. When I change the date to 1/1/2021 I get the proper calculation. Seems like I have to put in an incorrect date to get the proper calculation.

Just my experience.

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You do not receive a full year depreciation for an asset placed in service in the 4th quarter of the year.  You only receive about 25% of the full year deprecation.  For next year you would receive the full year of depreciation if the asset is in service for the full year.

[crlong]

I've been a loyal Turbo Tax customer for more than 15 years. How I regret that and wish I'd hired a professional years ago!!!!!

I had a rental property for 14 years that I sold in 2022. For years I was "under water" after the 2008 market crash but fortunately, I was able to sell the rental in 2022 for a good amount above the purchase price. Shame on me for not understanding the concept of depreciation. I'm now facing a large capital gain that could've been reduced had Turbo Tax (Premier) coached me through the depreciation calculation all these years. The only reason I hired an accountant for this year is in addition to selling the rental, I inherited some money and my husband received stock options. My accountant used to work for Turbo Tax and said errors in the software are almost always in favor of the IRS. That's why the IRS recommends Turbo Tax (unreal!).

If you have even one rental property, DO NOT USE TURBO TAX!!!  What's happened to me and so many others is absolutely criminal!!!!!!!!!!!

[KrisD15]

Depreciation on rental property is always figured on the lower amount, what you purchased the property for (your basis) or the value when the property is put into service.

You enter that into the TurboTax program when you list the rental.

Depreciation is taken year after year, there is nothing that you can do to change that. 

The Depreciation recapture is reported as Ordinary Income (not capital gain)

The profit you realized (the amount you sold it for which is over what you paid for it) is Capital gains. 

[marjeanb]

Have to agree. So does the accountant I saw this week. In the process of getting it straightened out. Thanks.

[marjeanb]

Unfortunately it didn't do it right to start with so I am now n the process of having an accountant straighten it out.

[crazysailor]

I am having the same problem with my rental property. The basis for the property is 205,000. This building cost only. The property was put in service 4/20/1999.  Last year the property depreciation was $7,454 from my CPA's depreciation schedule.  When I enter the depreciation figure for prior years in turbo tax, I get 27,225.00. What am I doing wrong? The property is a short term seasonal rental. Thanks for reading this problem.

[MarilynG1]

Do you use the property for personal purposes also?  If so, make sure you entered the number of days the property was rented in 2022, and number of days of personal use.

When you set up the rental property asset, and indicate that you first started renting in 1999, TurboTax calculates the 2022 depreciation amount for you.  You don't need to enter a Prior Depreciation amount, TurboTax calculates that for you.  

Depending on the % of Business Use, continue and you will see the 2022 depreciation number.  If you never used the property for personal purposes, the yearly depreciation would be calculated based on Cost Basis.  In the first screenshot, I indicated no personal use and 150 days rented. 

In the second screenshot, I indicated 150 days rented and 14 days of personal use. 

Check your entries in the Property Profile and Asset Entry areas. 

@crazysailor

 

[crazysailor]

Thank You for running the numbers for me. I am still confused.

The figures h from Turbo Tax are incorrect from my point of view. As I understand the depreciation at the end of the 27.5 years the value should be zero. Therefore if I multiply the estimated expense for the 100% business use, it should equal the cost basis figure of $205,000 right? Taking the 10,471.00 figure times 27.5 equals $261,775.00 or 56,775 over the cost basis of $205,000. Using the same logic with my figures for past filings, done by my CPA the figure is short by approximately one percent. Per the IRS the allowed annual percentage rate for SL MM is 3.636%? 

To sum it all the figure I am getting on Turbo Tax is approximately 3.5 times larger than previous years numbers and I can not figure out what I am doing wrong. I am using the 100% business use.

Thanks

carzysailor

[HopeS]

The place in service date also makes a difference in the depreciation expense. Residential real estate is depreciated over a 27.5 year life on a straight-line basis and used a mid-month conversion (this means that for the month placed in service, no matter what day during the month, you will only get a half of month's worth of depreciation for this first month).

Please make sure the Accumulated Depreciation from the prior depreciation report is entered correctly. Not all software shows the ending accumulated depreciation. Some software will show the prior year's ending and you would need to add 2021 depreciation expense in order to compute the correct 2021 accumulated depreciation amount.

Please also review the IRS Publication below:

How to Depreciate Property

@crazysailor