I discovered Turbotax never included depreciation expenses for any of the years we rented out our home. Now that we've sold the home, how do I calculate depreciation?

Forum|Forum|7 years ago
June 6, 2019
2 replies
8 views

No text available

TurboTax Free Edition Online

Best answer by Hal_Al

You should probably get your taxes done professionally, this year. You have a problem. When you sell a rental property, you are required to "recapture" (pay tax on) depreciation allowed or allowable. That is, you must adjust the gain (or loss) on the sale as if you had claimed deprecation. You may be able the amend up to three years back to add depreciation (2014 must be amended by 4-15-18)

Hal_Al

Answer

Level 15

TaxGuyBill

Level 13

Technically amending is not allowed if depreciation was not claimed for 2 or more years. The only way to fix it would be by filing Form 3115. As you say, a tax professional is highly recommended this year.

Anonymous

Under the depreciation section, the is an asset summary page:

There are several reasons why TurboTax may not have calculated depreciation for your asset. They include:

- the asset may already be fully depreciated

- you may have incorrectly entered the date you acquired the asset

- you may not have entered a cost for the asset

There are numerous screens that deal with the depreciation of a rental property.

Describe This Asset
Tell Us a Little More About Your Rental Asset
Tell Us About This Rental Asset

Once you have double-checked you answers and entered the information correctly, you will see the screen shot below

To manually calculate:

If you rented the home in 2017, be sure to include the 2017 partial year amount. Except for the first and last years which are partial, you may calculate it as below.

Year 2 though 9=3.636% times the basis. Years 10-26/27 see the table in link below if you want to be exact. Otherwise, continuing with the 3.636% will get you very close.

Year one= see table in the link below.

Last year=3.636 times the number of months held out for rent.

http://www.fkco.com/tax-forms-and-support/macrs-275-year-residential-real-estate-table

Anonymous

You may also use the following technique as a solution.
Unfortunately the depreciation recapture is "allowed or allowable" meaning even if you never depreciated it, you would still have to recapture the depreciation. Depreciation taken would be on line 18 of Schedule E.
One solution is to elect an accounting method change and file a Form 3115 in the current year and take the prior depreciation as a section 481(a) adjustment. [land value is separated, land is not depreciated]
Below are the IRS links related to the change in accounting method. TurboTax does not have that form.
May be these will help
Form 3115, Application for Change in Accounting Method
<a rel="nofollow" target="_blank" href="http://www.irs.gov/uac/Form-3115,-Application-for-Change-in-Accounting-Method">http://www.irs.gov/uac/Form-3115,-Application-for-Change-in-Accounting-Method</a>
Instructions for Form 3115 (03/2012)
<a rel="nofollow" target="_blank" href="http://www.irs.gov/instructions/i3115/index.html">http://www.irs.gov/instructions/i3115/index.html</a>
Form 3115,
<a rel="nofollow" target="_blank" href="http://www.irs.gov/file_source/pub/irs-pdf/f3115.pdf">http://www.irs.gov/file_source/pub/irs-pdf/f3115.pdf</a>