Rental Property Depreciation

[tsu2001]

I have a single family residence that I purchased for rental investment back in 2003.  Over the 20yrs I've owned it, I have only taken depreciation during the yrs that the property was rented to tenants (12 of 20yrs).  I placed it back into service in 2022 after not renting it for the prior 3yrs.  

1) Do I manually re-enter the depreciation schedule in TurboTax (picking up @ the 13th yr's depreciation balance).

2) I also made improvements in 2022 (new HVAC, Water Heater, and Electrical Rewiring).  Do I began new depreciation schedules for these items?

Thank you.

[tagteam · Accepted solution]

When you place the property back into service for rental use, the 27.5-year recovery period starts over from the year the property is placed into service.

You will use the lower of your adjusted basis or the fair market value on the date of the conversion to rental use as your new basis for depreciation. Since it is likely that your adjusted basis (which would be your cost basis less accumulated depreciation deductions plus improvements) would be lower than the fair market value, you would use your adjusted basis as the basis for depreciation.

[tsu2001]

Got it.

Do I need to submit anything to the IRS with respect to the change in schedule?

Thanks again.

[tagteam]

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@tsu2001 wrote:

Do I need to submit anything to the IRS with respect to the change in schedule?

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No, except for the Schedule E and there will be a 4562 generated for the first tax year you place the property back into service.

[Carl]

Do I need to submit anything to the IRS with respect to the change in schedule?

There is no change in any schedule. When you convert the property back to a rental, depreciation starts over from year zero, using the new, adjusted cost basis. The new cost bais will be what you originally paid for the property, plus the cost of any propety improvements you paid for ***MINUS*** the total amount of all depreciation taken previously.