Straight Line Depreciation gives $0 expense and missing depreciation method

[fleagle-yandex-c]

I am entering rental property (foreign if that matters) for the first time. I have been claiming SL depreciation of 27.5 years. When I enter all the details in TT following the advice to use Intangible / Other Assets it gives me $0 expense and no depreciation method.

Details: Cost $31,297; purchase date 01/01/2015; 100% business usage; asset class = 27.5 (Residential); useful life 27.5 yrs; prior depreciation $6,781.

TT calculations $0 expense; years to depreciate: 27.5; MACRS convention: MM; Depreciation Method: <blank>

Am expecting depreciation expense to be $1,138

[ThomasM125]

You mention that you designated it as "Intangible/Other Asset" that indicates that it is subject to amortization, as apposed to depreciation. You need to set it up as real property for it to be depreciated.

[fleagle-yandex-c]

Thomas, if that's the case, why do multiple screens after selecting Intangible / Other asset type ask for depreciation periods and prior depreciation amounts? This is also the method explained in multiple Help topics and questions on this. If I enter it as Real Property it calculations depreciation over 40 years, which is not correct, and doesn't match prior depreciations methods used by my tax accountant. I somehow need to be able to specify SL over 27.5 years.

[Mike9241]

you have a tax issue. for foreign residential rental property placed in service before 2018 the life is 40 years (about $782 per year). 

and while the method is still straight line MACRS it's under the ADS (alt) method which prescribes the longer life for foreign rentals. to correct this issue you need to file form 3115 and you are required to pick up as income the excess depreciation. see a tax pro 

[Carl]

If I enter it as Real Property it calculations depreciation over 40 years,

If the property is not in the U.S., but a foreign country *and* the property was place in service in 2017 or earlier, then 40 years depreciation is correct.

If the property is not in the U.S., but in a foreign country *and* the property was placed in service in 2018 or after, then it's depreciated over 30 years.

If the property is in the U.S., then it's depreciated over 27.5 years.

The program handles all three scenarios just fine, without having to enter it as other assets.

In t he Assets/Depreciation section click "Add an Asset" and work it through as you normally do for residential rental real estate. On the first screen, "Is this rental property or royalty?" make sure you have selected weather it's foreign or U.S.

[fleagle-yandex-c]

Thanks Mike. I have been using tax pros - both my previous two tax accountants were using SL 27.5. I've been trying out TT to see if I can do it myself and save some money; this is the only glitch I've hit.  Sounds like I'll just stick with my paying my tax accountants and scrap TT.

[fleagle-yandex-c]

Thanks Carl. As I just replied to Mike, my human tax accountants (two different people/firms over the last few years) have been using 27.5 (perhaps incorrectly). I was hoping to start doing my own tax but if I can't continue with 27.5 in TT looks like I'll stick with paying someone.

[Carl]

have been using 27.5 (perhaps incorrectly)

Yes, they have been doing it incorrectly. You do need to have that fixed too, as there is the possibility (However slim) that it could catch up to you in the future.

To fix it, requires you to include IRS Form 3115 with  your tax return. While the TTX program does include that form, it's not simple by any stretch. You should seek professional help for this. Then, once it's "fixed" correctly on your 2021 return, you can if you like, start using the TTX program for your 2022 taxes.

[tagteam]

I agree with @Carl that Form 3115 requires professional intervention, but the form is included in TurboTax.

[Carl]

Another option you have, is to pay the tax pro to complete the 2021 tax return for you. Then they provide you with a complete printout of the tax return that includes all calculation worksteets and forms.

Then, you duplicate that printed data using TurboTax (especially the form 3115) and e-file it yourself. Now I do not know if you can e-file with the 3115. You may have to print, sign and mail it. But I've never heard or seen anything indicating a tax return with the 3115 can't be e-filed. At this point, I am assuming you can e-file with it.

Then next year when you start your 2022 tax return, you can just import your data from the .tax2021 tax file, saving you the time and aggravation of doing it all from scratch twice.