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Rental Property Depreciation not calculating correctly.. I think.

So I bought a rental property in July 2022 and after calculating the depreciation on it for the last half of 2022, turbo tax showed  roughly $1600 depreciation which everything seemed normal.  This year for 2023 tax year,  I started going through the depreciation prompts in turbo tax and it shows or acts like the depreciation for 2023 should be around +/ -$3000 which kind of make sense because it is double the previous year (6 months).  The problem I am running to is at the end of the prompts when you click "done", it reverts the depreciation value for 2023 back to $0.  

 

This is my first rental property and I am not sure 100% how the depreciation is supposed to work.  Should I expect to see a depreciation of around $3000 every year for the next 27years.  

 

The rental property had a purchase prices of $112000

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5 Replies
KrisD15
Expert Alumni

Rental Property Depreciation not calculating correctly.. I think.

Are you entering this all on schedule E (rental section) in TurboTax and did the rental carry forward form 2022 when you first entered it? 

Did you value the land and also the building? Land does not depreciate but the building does. 

If the program is figuring 3,000 yearly depreciation, the value of that asset would be 82,500. Is that what you entered as the value of the building? That would leave 29,500 for the land. Does that sound right? 

 

Look at your Schedule E line 18 and also Form 4562 as well as the depreciation worksheet to see what is being claimed and the values you put on your assets. 

Depreciation is a BIG factor when you sell the rental as you may need to claim "Depreciation Recapture" 

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Rental Property Depreciation not calculating correctly.. I think.

Yes that all sounds right.  I am working off the step by step guide but that is populating the schedule e form.

 

Last tax year I owned the property as a rental for about 6 months and turbo tax shows that 2022 season depreciation at +/_ $1600.  For this 2023, I have owned the property for 1.5 years.  It's computing around $3000 in the step by step guide but when I click done it just shows 0 like something went wrong.

 

Let me ask you this. Essentially the numbers you said were correct. Purchase price $112000, house around $82500, Land around $29500.  If I was not having an issue Does this breakdown for depreciation seem like I am trying to depreciate it correctly?

 

I am going to look into the actual schedule e form tonight.  

AnnetteB6
Employee Tax Expert

Rental Property Depreciation not calculating correctly.. I think.

Go through the depreciation entries for the property itself and see what the percent business use is showing.  If there is a zero in that field, the depreciation would be zero.  

 

Also, was the property used as a rental for all of 2023?  Double-check the information that you have entered in the Property Profile section with regard to the days it was rented/personal use days.  

 

Otherwise, it seems as if things are set up correctly and it would have carried forward into your 2023 return from your 2022 return.  

 

@davidgeorge212 

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Carl
Level 15

Rental Property Depreciation not calculating correctly.. I think.

You've made an incorrect entry or incorrect selection somewhere is all. Work it through and make sure to read the small print on each and every screen. Hopefully, the below will help.

When/if asked how long the property was rented, select "the whole year".
When asked for days of personal use, that should be zero.
Percentage of business use should be 100%.
Days rented (only if asked) should be the number of days you had a renter contracted to be in there. Weather they were actually living in it or not, doesn't matter. They were "contracted" to be in it.  If there was a vacant period between renters, that fine. Vacant days do not count against you. But personal use days "do" count against you, and therefore should be zero personal use days.

Rental Property Depreciation not calculating correctly.. I think.

Some of those screens in TurboTax are misleading.  If your loss is suspended for some reason, it might show $0, even if it is actually allowing the proper amount.  But look at the actual Schedule E to see if it is showing up there.

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