I thought the depreciation for real estate rental property was based on 27.5 years not 39. Is this correct?

Forum|Forum|6 years ago
January 23, 2020
2 replies
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AnnetteB6

Level 15

It depends on whether the real estate rental property is residential or not.

Residential rental property has a depreciation recovery period of 27.5 years. Nonresidential rental property has a depreciation recovery period of 39 years.

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jmoose

Level 2

I converted the main part of my home (lived there 11 years) to a Vacation Rental in 5/2020. I am using the smaller part (a cottage) for personal use but do not live there at of 5/2020. I was told to set up my Vacation Rental as a Schedule C Business. It is only offering me to choose the property as a Non-residential Real Estate depreciated over 39 vs 27.5 years. Is this correct? Should I set this up differently?

Next question, Since both my husband and I own the house, should I set this up with each of use having a separate business (split income, expenses and asset on schedule). Told it would reduce SS since he has a job that maxes out on SS.

Thanks!

DianeC958

Level 12

Yes, you are correct you can depreciate the Rental Property over 27.5 years not 39

years.

Since this is a rental property you will save yourself the Social Security and Medicare tax if you set it up in the Rental Section of TurboTax.

Rental Properties are passive income and are not charged Social Security and Medicare Tax on the profits.

To enter your rental:

In TurboTax, search for rentals and select the Jump to link at the top of the search results.
Answer Yes to the question Did you have any rental or royalty income and expenses in 2019 for property you own?
Follow the on-screen instructions as you proceed through the rental and royalties section.
- We'll ask you to enter general information about your rental (like description, address, and ownership percentage).
- Eventually, you'll come to the Rental Summary screen, which is where you enter your rental income and expenses, assets and depreciation, and vehicle expenses.

@jmoose

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Carl

Level 11

If this is "truly" a vacation rental, then that means you are providing your short term tenants recurring services that are "directly beneficial" to those tenants. (housekeeping/maid services and the such). That makes it a SCH C business. A SCH C real estate asset is depreciated over 39 years. Period. End of that story.

Otherwise, if this is a SCH E rental and it's physically located in the United States, it gets reported on SCH E and is depreciated over 27.5 years. Period. End of that story.

If this is a foreign rental property that qualifies as SCH C income and is reported as such, then if it was placed "in service" in 2018 or after it gets depreciated over 40 years. Period.

If this is a foreign rental property that qualifies as SCH E income and is reported as such, then if it was placed "in service" in 2018 or after, it gets depreciated over 30 years. Period.