.

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.

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

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.

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.

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.

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

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.

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?  

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.

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.

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

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

@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.

Thank you Dave for you explanation. I can see my rental property purchased last year in foreign Country are depreciated in 30 year. However, I am a bit confused with the depreciation method it listed as following:

Years to fully depreciate:30.0 years

MACRS Convention: MM

Depreciation Method: ALT

Do you mind explaining a bit more what ALT and MM means, and is it any different from ADS?

Very much appreciate you help!

"ALT" is an improper abbreviation for the Alternative Depreciation System (ADS)  (see the link for a definition).

"MM" is the correct abbreviation for the Mid-Month Convention (see the link for a definition).

The mid-month convention states that all fixed asset acquisitions are assumed to have been purchased in the middle of the month for depreciation purposes. Thus, if a fixed asset was acquired on January 5th, the convention states that you bought it on January 15th; or, if you bought it on January 28, still assume that you bought it on January 15th. Doing so makes it easier to calculate a standard half-month of depreciation for that first month of ownership.

Hi, I have a foreign rental condo in Canada that I purchased in 2014 as my personal home. I moved to the US in Feb 2019 and began to rent out this apartment. I am confused about how I should be depreciating this asset. Last year when my taxes were professionally filed, it was the first year that the apartment was being rented and for depreciation it was assumed to have a life of 39.5 years using a half year method under the Alternative Depreciation System. When I go to enter my information in Turbotax this year, it gives me a recovery period of 27.5 years. Can someone please explain what the correct depreciation should be and also what happens if the recovery period changes this year from last? Turbotax is not letting me adjust the 27.5 years. I know that the depreciation differs based on US versus foreign property and if put into use before 2018. Any help would be much appreciated.

Hi, I have a foreign rental condo in Canada that I purchased in 2014 as my personal home. I moved to the US in Feb 2019 and began to rent out this apartment. I am confused about how I should be depreciating this asset. Last year when my taxes were professionally filed, it was the first year that the apartment was being rented and for depreciation it was assumed to have a life of 39.5 years using a half year method under the Alternative Depreciation System.

Nope. Because the property was placed in service as a rental "after" 2017, it gets depreciated over 30 years.

When I go to enter my information in Turbotax this year, it gives me a recovery period of 27.5 years.

That's because in the property profile section you did not change the default selection from United States or U.S. Possession, to Foreign Country. Work back through the property profile section again and make that change. You "may" have to delete/re-enter the property in the Assets/Depreciation section to, so it will pick up the correct MACRS depreciation period of 30 years.

Can someone please explain what the correct depreciation should be and also what happens if the recovery period changes this year from last? Turbotax is not letting me adjust the 27.5 years.

Since 2019 was the first year the property was placed in service, there's really no need to amend that return.  Just make sure when you enter the asset on your 2020 return with an in service date of whatever month in 2019, you correct the prior year's depreciation to the amount that was actually taken on the 2019 return. Then TTX 2020 will adjust the 2020 depreciation accordingly and get you on the right track.

I know that the depreciation differs based on US versus foreign property and if put into use before 2018.

According you you, the property was placed in service as a rental in 2019. Therefore the depreciation period is 30 years.

Hi Tod,

Thank you very much for your explanation.

I am trying to depreciate some asset in Appliance, Carpet, Furniture Carpet category using turbo tax, it gives me the option to use either Half-year convention or mid-quarter convention. Do you know which one applies for rental property?

Thank you

Xin

When entering the appliance assets, select "Rental Real Estate Property" on the first screen. Then select "Appliances, carpet, furniture" on the 2nd screen.  The program does not ask you for the convention because it already "knows" the correct convention to use, based on your acquisition/in-service date.

Also note that the SEC179 deduction is not allowed for this. I know you see the option available in the program. That's because if you were renting "commercial" rental real estate, then SEC179 would be valid. But it's not valid for "residential" rental real estate. Besides, the 100% Special Depreciation Allowance allows basically the same thing anyway.

Overall though, I expect you'll find that depreciating the appliances separately isn't going to make a penny of difference to your tax liability anyway. But you most certainly can do that if you want to. It does have the potential to become a paperwork nightmare if/when one of those appliances breaks and you have to replace it. Also, if you purchased the house with those appliances already there, then whatever cost basis you assign to the appliances, you have to subtract from your cost basis of the property.

@Carl I have foreign rental property since 2007 and 2005 respectively that I depreciated on TT for years but now need to completely re-enter**.  However, I can not figure out how to get my old 40 year ALT/MM depreciation data to show up correctly in the Form 4562.  I tried to change things vis step-by-step as instructed (also in this forum) and via "Form View" but It does not allow me to choose the setting combination from the previous years.  For example, it  forces a choice of "asset class" and when I choose "Residential rental" (which it is, then that forces 27.5 years, etc. - If I force that to 40 years manually, the Asset Class box turns red and the warning icon pops up next to the form...WHAT CAN I DO??

I have depreciated them through the TT program without issues for years.  Due to the conventions back then , the depreciation period was 40 years and the parameters that show on Form 4562 show Method/Convention SL/MM. A fews ago I also had PWC look over my taxes and they confirmed this was correct.

** The reason for the re-entry need is that - like for many others - my 2021 TT Home & Business desktop edition Amort & depreciation area is constantly showing "Still under construction" and the only help the TT agents can provide after over 5 hours (yes, that is FIVE) is to do a "clean install" and not import any of my historic data.

@Carl , @ReneeM7122 ... and forgot to add:  YES, I do check in the step-by-step that this is rental property OUTSIDE the US (on that check list) in ADDITION to also clicking on the foreign address entry and entering that.

Thanks a lot for your help!

Since you've done a clean install, all you can do is try the import again and see if it works. Just make a backup of the existing .tax2021 file in the documents/turbotax directory. Then delete the .tax2021 file from the documents/turbotax directory. Then fire up the program and import. See if it's done so correctly. If it has, then life is good and you can press on.
if it does not import correctly, then I can only suggest you contact support again for a refund, as you just flat out will not be able to use TTX for your 2021 tax return. That's the bottom line. I've even checked if 40 years is an option if you enter it as "other" in the assets/depreciation section. 40 years is not an available selection.

Note that if you did not purhcase your CD installation directly from TurboTax, then you will have to seek your refund from the vendor you purchased it from.

Note that you are not the only one I've seen with this specific issue. So far, there seems to be no fix from TurboTax, and at this point I doubt there will be one out in time, this late in the filing season.

@CarlDo you know if the IRS accepts a mail-in paper return that is 90%+ typed and the rest filled in by hand (or typed but with a good two dozen hand-written strike-through and overwrite corrections)? 

I tried to import my 2021 on the clean install together with TT tech - It, again, did not work. completely. However, I can see ALL my tax entries correctly print as Form PDFs - except for some errors/omissions in the Home Office Depreciation area (F 8829 and the respective line in Schedule E) and some of the Form 4562 Depreciation tables are wrong and the respective lines in Schedule E, too.