That is an Improvement" meaning you add the roof as an asset, not as a repair or expense. (unless it was a very small patch)
Assets are then depreciated, just like the building.
This year, as part of the Tax Cuts and Jobs Act, the Taxpayer (you) have the option of using Bonus Depreciation and/or the 179 deduction. This means that you can "Depreciate" or Deduct the full cost on your 2018 return (if eligible- must be purchased and put into use in 2018). or an adjusted amount, whichever would benefit you more.
You will be given options when you enter the asset (roof) into the TurboTax program.
What did you end up doing? the only options are Residential Real Estate, Applicances/Carpet/Furniture, and Land Improvement.
You will need to add this is an asset to depreciate in your rental property. Please follow the instructions how to do this in this Turbo Tax link. .
I see three post in this thread prior to mine, and nobody has answered the question.
There is no question that a new roof is "a physical part of" the rental property. It's classified as Residential Rental Real Estate and gets depreciated over 27.5 years. Period.
Right, but how in TT do you "tell it" that. I, too, am only given an option for an actual add'l property or another piece of real estate...
A new roof on a rental property is classified as "Residential Rental Real Estate" Period. It gets depreciated over 27.5 years.
You enter your new roof in the assets/depreciation section of the program. In the COST box you enter what you paid for that new roof. In the "COST OF LAND" box, you enter the digit ZERO, since this is not a land improvement any way you look at it.
If offered the Special Depreciation Allowance (SDA) I highly recommend you NOT take it, but instead elect to depreciate it over the next 27.5 years. Taking the SDA will more than likely not reduce your tax liability one single penny - especially if you have a mortgage on the property. Besides, when you sell or otherwise dispose of the property, you are required to recapture that depreciation and pay taxes on that depreciation in the tax year you sell and recapture the depreciation. Recaptured depreciation increases your AGI for that tax year, and can have the potential to bump you into the next higher tax bracket.
What benefits you now, can hurt you 10 times over, later.
So you select in TT Deluxe as if you are selecting an actual property (ex "123 Broad St.") but type in "new roof" instead of a property address in the description? This is where I get confused: trying to guess what TT option will lead me to the appropriate recovery period.
I'm not understanding what's so difficult about this for you.
- On the "Your Property Assets" screen, click the "Add An Asset" button.
- Select "Rental Real Estate Property" and click continue.
- Select "Residential Rental Real Estate" and click continue.
Describe the residential real estate: NEW ROOF
Cost: The total numeric dollar amount you paid for it.
Cost of Land: the digit ZERO. (You did not buy land - you bought a new roof)
Date purchased or acquired: The date installation was complete.
- Click Continue.
- Select "purchased new" and "used 100% for this business", and the date the roof was either completed, or was available for use by a tenant - whichever date is *last". Then click continue.
You can review details on this screen if you like. Then click DONE and that's it. You're done with this asset.
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The confusion (for me) is that when one selects "new real estate" it implies (to me, anyway) that one is adding an actual new house to the list of assets, especially when the example TT uses is a property address. I didn't find any guidance that explains "new real estate" could also be a roof, solar panels, plumbing, or whatever.
You're reading into the question, information that just is not there. Don't sweat it though, as while I can't say I see it all the time, I can say I see it often enough to understand it somewhat. For example, under "Describe the residential real estate" you see "E.g. 123 Main Street, Broad & River". The "E.g." signifies that this is an example. Only an example. Nothing more. For description you could put "new thing to cover the walls and floor of the house" and that would actually be fine. In fact, the IRS would know exactly what you were talking about, and probably pass it around to their co-workers for a good laugh.
If you were to install new windows throughout your rental property, that would most likely be a few thousand dollars. That gets classified exactly the same as the new roof. You'd just label it "new windows" is all, and press on.
Yes, I understand that now. I was simply responding to your "I don't understand what is so difficult..." opening comment in my last message. Now you know: it was my definition of "new real estate," which was only reinforced by the example given by TT. Perhaps others will have the same question.
Thank you for your help.
Yeah. I should have caught that. One issue with communications in a text based communications medium such as this forum, is that the emotion invoked with writing a comment, is not always the same as the emotion invoked by the reader of that comment. I try to check and catch those things just before hitting that "post" button. That one got by me.
I guess it has to do with my military experience. I've basically been taught to receive and interpret communications based on the content of that communication, and not on the context of it's delivery to me. Kinda like that phrase we had as kids, and I"m sure you had the same phrase. "Sticks and stones may break my bones, but words can never hurt me!". Ah! The memories of a simpler time!
You may rest assured that I was responding to the simple content of your reply.
I save my emotion for my job. (see my profile name)
😄
Be well.
I played a Gemeinhardt in my middle and high school days. Still have it. Had it re-padded for my daughter. Hoping to do the same for my grand daughter.
I thought the EXACT same as you so thank you for asking this question!
Operaflute, your question made perfect sense to me. I had the exact same question. Turbotax is unclear in its examples and clicking "residential real estate" DOES make it sound like you are adding in a new building. Thanks for posting - even though the answer seemed obvious to some, it was not obvious to me either.
Years ago, I added the new roof to the rental property as an asset. Now that I sold the rental property, TT is asking what the sales price of the new roof is. Well, I didn't sell the roof separately from the home. What do I enter?
The sales price of the roof and any other assets you are depreciating is zero. Only the home has a sales price. Everything else was included free with the purchase.
The sales price of the roof and any other assets you are depreciating is zero.
Thats wrong. If you make the sales price of other assets zero, then the depreciation on those assets is included in the capital gains, and is taxed at the capital gains tax rate. If you sold the property at a gain, you need to show a gain on every asset that is "at least" $1 more than the cost basis of the asset. That is the only way the depreciation will be correctly recaptured and taxed at the ordinary income tax rate, instead of the capital gains tax rate.
Here's the general guidance on how to correctly report the sale of rental property, in the SCH E section of the program.
Reporting the Sale of Rental Property
If you qualify for the "lived in 2 of last 5 years" capital gains exclusion, then when prompted you WILL indicate that this sale DOES INCLUDE the sale of your main home. For AD MIL personnel who don't qualify because of PCS orders, select this option anyway, because you "MIGHT" qualify for at last a partial exclusion.
Start working through Rental & Royalty Income (SCH E) "AS IF" you did not sell the property. One of the screens near the start will have a selection on it for "I sold or otherwise disposed of this property in 2021". Select it. After you select the "I sold or otherwise disposed of this property in 2021" you continue working it through "as if" you still own it. When you come to the summary screen you will enter all of your rental income and expenses, even if it's zero. Then you MUST work through the "Sale of Property/Depreciation" section. You must work through each individual asset one at a time to report its disposition (in your case, all your rental assets were sold).
Understand that if more than the property itself is listed in your assets list, then you need to allocate your sales price across all of your assets. You will only allocate the structure sales price; you will NOT allocate the land sales price, since the land is not a depreciable asset. Then if you sold this rental at a gain, you must show a gain on all assets, even if that gain is $1 on some assets. Likewise, if you sold at a loss then you must show a loss on all assets, even if that loss is $1 on some assets.
Basically, when working through an asset you select the option for "I stopped using this asset in 2021" and go from there. Note that you MUST do this for EACH AND EVERY asset listed.
When you finish working through everything listed in the assets section, if you ever at any time you owned this rental you claimed vehicle expenses, then you must also work through the vehicle section and show the disposition of the vehicle. Most likely, your vehicle disposition will be "removed for personal use", as I seriously doubt you sold your vehicle as a part of this rental sale.
Champ, Thank you for your detailed description. I have been looking at all different posts for the past hour. This simple answer that you provided just let me fly right through.