TT keeps changing rental from 27.5 to 40 years. I always used 27.5. Also TT changes depreciation amt from $2658 to $1700 and puts $958 in Adjustment preferences.

[kimberlyjones1]

I dont understand the AMT.  I know it changed this year.  Why is is changing my depreciation life of the rental property to 40 years and making an adjustment /preference.  Is the adjustment a tax I pay or is it a carry over.

[KarenJ · Accepted solution]

AMT gives even tax professionals a headache at times.  It is not easy to understand. 

The software is changing your depreciation because for AMT purposes, you generally must depreciate (deduct) business assets over a longer period of time than you can for regular tax purposes. This creates a difference between regular tax depreciation and AMT depreciation.   The adjustment is not a tax you pay.

The IRS requires that you calculate your tax in 2 different ways, you need to calculate your regular tax and you need to calculate you income and deductions for AMT (alternative minimum tax).  You end up paying which ever one is higher.  The good news is that the new tax law, Tax Cuts and Jobs Act ,made changes to the AMT tax rules so you are less likely this year to be subject to AMT rules.

Line 34 on the 6251 will tell you if you have to pay any extra tax due to AMT.  TurboTax will calculate all of this for you.

Please see below for the TurboTax FAQ ( really great guide) regarding AMT:

https://turbotax.intuit.com/tax-tips/irs-tax-return/alternative-minimum-tax-common-questions/L50YotK...

[kimberlyjones1]

Thank you Karen for your quick explanatory answer.

[KarenJ]

You are welcome!

[Rosangelina]

Hi @KarenJ new with TT, and same situation here…2022 filing and TT changed my foreign rental properties from 27.5 to 40 and 30 years.  I cannot change the amounts on Forms.  I’m using TT Home & Business.  If I can’t change back to 27.5 years, will I need to amend prior years returns (up to how many years?). Or do I need to file a form (what IRS form number?) with my 2022-1040 about the year change?  Or do I just leave it alone, file 1040 as is (with new depreciation years).  Many in advance for your response and advise….

R….

[Carl]

Rental real estate property located in the United States is depreciated over 27.5 years.

Rental property located in a foreign country *AND* placed in service *before* Jan 1, 2018 is depreciated over 40 years.

Rental property located in a foreign country *AND* place in service *on or after* Jan 1, 2018 is depreciated over 30 years.

So it's important to get two things right.

1. Location of property (domestic or foreign)

2. Date the property was placed "in service"

[Rosangelina]

@Carl thanks, my tax preparer friend was depreciating both of my foreign properties at 27.5 years 😢😩.  One was placed in service in 2006 (should be 40 years) and the other in 2020 (should be 30 years).  Should I:

1.  amend prior years returns (up to how many years?), or

2.  is form 3115 used for this type of error?  

Or any other advise?  Thanks in advance..

R…

[AmeliesUncle]

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@Rosangelina  wrote:

@Carl thanks, my tax preparer friend was depreciating both of my foreign properties at 27.5 years 😢😩.  One was placed in service in 2006 (should be 40 years) and the other in 2020 (should be 30 years).  Should I:

1.  amend prior years returns (up to how many years?), or

2.  is form 3115 used for this type of error?  

Or any other advise?  Thanks in advance..

R…

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You need to use Form 3115 to straighten things out.  I recommend going to a good tax professional that is familiar with how to use Form 3115 to correct depreciation methods.

[Carl]

One was placed in service in 2006 (should be 40 years)

Correct.

and the other in 2020 (should be 30 years).

The use of form 3115 is not a recommendation. It is a requirement.  You have been using what is referred to by the IRS as an impermissible method of depreciation. Per IRS Publication 946 at https://www.irs.gov/pub/irs-pdf/p946.pdf beginning at the bottom of page 13:

Generally, you must get IRS approval to change your method of accounting. You must generally file Form 3115, Application for Change in Accounting Method, to request a change in your method of accounting for depreciation. The following are examples of a change in method of accounting for depreciation.
• A change from an impermissible method of determining depreciation for depreciable property if the impermissible method was used in two or more consecutively filed tax returns.

Now while TurboTax does include the 3115, it is not simple by any stretch and the program provides no help or guidance in correctly completing the form due it it's complexity depending on the given situation. Therefore you should seek professional help with this. This is especially true if your state taxes personal income, as doing this form wrong can (and usually will) end up costing your more that the professional help, in the long run.

[Rosangelina]

@Carl thank you again for your response.  

1)  For my property placed in service from Nov 2020, can I amend my 2020 and 2021 returns (from 27.5 to 30 years life).  

2). Now the bigger problem -  for my property placed in service in 2006 - understand that I will need to seek professional help with preparing F-3115.  I don’t live in the US.  The expats deadline to mail the 2022 return is on June 15. I plan to file an extension to Oct 15 to have more time to get the F3115 done.  Do the 1040 and 3115 have to be mailed together?  And should I already use the correct year (40) for the 2022 depreciation amount? TT has me now on 40 years and I don’t know how to change it back to the incorrect 27.5.   Or do I wait for the IRS approval to change?  

I know I need to seek professional help…am wondering if there’s anyone here in the Community that can help me to prepare the 3115.  In the meantime, your input really helps and much appreciated.  Many thanks…

R…

[Carl]

1) For my property placed in service from Nov 2020, can I amend my 2020 and 2021 returns (from 27.5 to 30 years life).

No. Read what is says in IRS Pub 946, of which I highlighted the applicable part in red above.

2). Now the bigger problem - for my property placed in service in 2006 - understand that I will need to seek professional help with preparing F-3115. I don’t live in the US. The expats deadline to mail the 2022 return is on June 15.

Don't know what to tell you, other than it's probably to late to file any extension. I don't know if that's the case for an expat or not though. Since you have to file the 3115 anyway, you deal with both properties on a single 3115.  Instructions for that form are at https://www.irs.gov/pub/irs-pdf/i3115.pdf. While you're welcome to give it a try, all I can really offer is best of luck. You may be able to find help or a reference at the local U.S. Embassy or satellite location in your area if that's closer.

[tagteam]

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 wrote:@Rosangelina

Do the 1040 and 3115 have to be mailed together? 

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You have to attach Form 3115 to your 1040 and also file a copy of the signed Form 3115 (duplicate copy) with the IRS National Office.

See https://www.irs.gov/instructions/i3115#en_US_202212_publink63215hd0e217