TurboTax is making me depreciate a foreign rental property over 27.5 years. Should it not be 40 years? I've made sure I entered a foreign address.

[MinhT1]

The depreciation period for a residential rental property (even situated abroad) is 27.5 years. 

For non-residential rental property situated abroad, it is 40 years.

[rz4]

Thank you!

[rz4]

Actually, I have a follow-up question: is this new for 2020? My prior years' depreciation using TurboTax were over 40 years.

[MinhT1]

Yes. This has changed. Prior to 2018, the depreciation for all foreign real estate is 40 years. 

From 2018. the depreciation for foreign residential properties is 30 years (not 27.5 years as I stated previously).

The 27.5 year depreciation period is for residential rental property in the US.

[rz4]

Understood. If it's supposed to be 30 years and I'm seeing 27.5 in my 2020 tax return, should I request a technical review of my file/raise a ticket? The property was placed in business in 2017, if that matters. Thanks.

[AmeliesUncle]

Besides entering a foreign address, there is a check-box somewhere to indicate it is outside of the US.  I suspect it may be part of the "asset" section, but it might also be in the introductory part of the rental section.

[rz4]

That's right - I missed the checkbox 'My property is on an Indian reservation, disaster area, or outside the US'. Thank you!

[AmeliesUncle]

A couple more things ...

1. Is the program depreciating it over 30 years, or 40 years? 
2. You might consider waiting to actually file.  The new law retroactively changes it to 30 years, but because you were using 40 years (it was "placed in service" before 2018), that causes some adjustments.  As far as I know, the IRS has not yet given guidance if any 'special' provisions can be made for this situation, and I am almost positive the TurboTax is not set up for this scenario.

[rz4]

Thanks for following up. TurboTax is giving me a 40-year depreciation schedule, which is what I had last year and the year before.

With waiting to file, are you suggesting that I do not file using TurboTax at all this year?  

[DaveF1006]

You do need to go to the section where you entered your rental property information.

1. Select the federal tab, then go to wages and income.
2.  Scroll to Rentals, Royalties and Farms click on the drop down that says show more 
3. Select the federal tab, then go to wages and income.
4.  Scroll to Rentals, Royalties and Farms click on the drop down that says show more
5.  Select Rental Properties and Royalties (Sch E) Select start
6. Then you will go through a series of questions regarding your rental property.
7. Once these questions are answered, Turbo Tax will take you to a Rental Summary Screen. Select edit  
8. When you report your property, make sure you indicate that under rental property information that it is a foreign address and when the screen asks if Is a located in any of these areas?
9. Make sure you check property assets are located outside of the United States or United States possession
10.  Now check your asset information and at the end of the summary, you should see that it is now depreciated using a 40-year depreciation schedule.
11. Here is what the screen will look like if you entered the information properly.

[AmeliesUncle]

I think I mistaken in your situation.  The change to 30 years is limited in scope, and at first glance may not appear to apply to foreign property.  

So I think you should be good with continuing to depreciate it over 40 years.

[ReneeM7122]

You are correct.  Rental property outside of the US is depreciated over 27.5 years, but for rental properties placed in service in 2017 or earlier, it's 40 years. 

Here is an IRS link for more information.

@AmeliesUncle

[Maria01]

HI 

Could you please assist how I can input changes in Tourbo tax in such a way that depreciation for my foreign property is taking 40 years as my property was placed in service before 2018. Thanks

[Carl]

@Maria01 

What tax year are you working on? I ask, because if the property was placed in service before 2018, then I would expect you to be working on a 2017 tax return.

It's also possible that the 2020 tax year is just your first year using the TTX program, and you're entering the data from the prior year return that was not prepared with TurboTax. This matters so that I can be absolutely certain you don't get misinformed in a way that could cost you later down the road on the tax front.