21366
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
Announcements
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

Over due action to claim depreciation of improvements on residential real estate.

I have not depreciated improvements on my business residential real estate property for several years. I sold the property and want to claim the years of depreciation in my Premier package. How to do it?

x
Do you have an Intuit account?

Do you have an Intuit account?

You'll need to sign in or create an account to connect with an expert.

1 Reply
Carl
Level 15

Over due action to claim depreciation of improvements on residential real estate.

Report it on SCH E in the Rental & Royalty Income (SCH E) section of the program.

The "in service" date will be the original date you placed the property in service all those years ago. Make sure you also select the option to indicate that you "sold or otherwise disposed of this property in 2018".

For rental income, because of a program quirk you *MUST* enter an amount - even if that income amount for 2018 is a zero.

For rental expenses, if you have none, then it's not even necessary to work that through. However, my bet is that you did make "at least" one mortgage payment on the property in 2018 prior to the sale. If so, you'll need to work through the rental expenses section to enter that 1098 for the mortgage interest, as well as any property insurance and property taxes that you may have paid prior to the sale.

Next will be the Assets/Depreciation section. However, if you selected the option at the start to indicate you sold the property in 2018, that section will be titled "sale of assets/depreciation". On your first run-through do "NOT" select that you stopped using the asset in 2018.

You must work through this section and at a minimum you must enter the property itself, making sure to use the original "in service" date from years back. Towards the end you'll be shown what the program "Presumes" was the depreciation taken in prior tax years. Change that number to a zero and continue on.

The final screen will show you the depreciation for the current tax year (2018) which will be rather high, becuase it will include all the depreciation you "should" have taken in prior years. Just click continue until you are returned to the list of assets.

Now elect to edit that asset you just entered and work it through. This time though, make sure you select the option to indicate that you *DID* stop using the asset in 2018. Then you'll indicate you sold the asset and continue working it through entering the sales information and other data the program will ask you for.

The program will tax you appropriately on the depreciation you did not take in prior years, by reducing your original cost basis by the total amount of depreciation taken in 2018, which already includes the depreciation you did not take in prior years.

SPECIAL NOTE FOR OTHERS READING THIS THREAD: You can not do this if you did NOT actually sell the property. If you just need to "catch up" your depreciation and did not sell the property, then you have to amend all of the prior year's returns to take the depreciation, and catch up that way. However, if you did not take depreciation for *MORE* than the *last* three tax years, you can not amend to correct this issue. (The IRS says you can only amend the current tax year, and three years back.) Instead, you will have to file IRS Form 3115 - Change in Accounting Method. This form can be *VERY* complicated and will require personalized professional help. TurboTax can NOT handle this situation. So you will *HAVE* to seek professional help. This is particularly true if your state taxes personal income, as you're going to be dealing with a double-whammy if that's your case.

At

Unlock tailored help options in your account.

message box icon

Get more help

Ask questions and learn more about your taxes and finances.

Post your Question