topic Rental Property Depreciation in Business & farm

Rental Property Depreciation

Taxman2004 — Mon, 09 Mar 2026 09:13:28 GMT

When a rental property that was converted from personal use is sold at a gain, the original price of the property can be used to determine the basis for entry, along with the expenses of the sale, At the time of conversion, the lower of the FMV or original price has to be used for depreciation purposes. When the sale of the property is recorded for form 4797 and the original price is entered, Turbo Tax calculates the prior depreciation using the original price, but this number can be overridden. The problem I am having is that Turbo Tax calculates the current year depreciation using the original price. But this produces too much depreciation for the current year, since the depreciation should be calculated using the FMV that was originally used. Where it was easy to override the total prior depreciation, how/where do you override the current year 2021 depreciation?

Re: Rental Property Depreciation

DaveF1006 — Thu, 03 Mar 2022 21:45:41 GMT

Yes it can be overridden. When you at the rental summary page, select the rental and then go to sale of property/depreciation.

Navigate to your property asset page and select the rental again
When you are at the page that says Tell us About Your Rental Asset in the cost section record the lower FMV amount. You may need to make a land adjustment here too if you reported a basis for land.
in the next screen Tell us more about your rental Asset is where you will record that you sold it, the date it was sold, and the date you used it for business.
Next screen is Confirm your Prior Depreciation. Here is where you can make the adjustment if it isn't already corrected.
Next screen says Asset summary. The depreciation for this year should reflect the amount of depreciation based on the lower FMV value you entered in step 2.

Re: Rental Property Depreciation

AmeliesUncle — Fri, 04 Mar 2022 01:52:43 GMT

TurboTax is not set up for this.

In the rental section, say you converted it to personal use.

Then report the sale in "Sale of Business Property" section.

Re: Rental Property Depreciation

Taxman2004 — Sun, 06 Mar 2022 23:41:39 GMT

I don't believe the answer addressed my issue. My concern was how do I, if Turbo Tax allows, adjust the current (2021) yearly depreciation. I new how (found in Turbo Tax) to adjust the total prior depreciation.

Re: Rental Property Depreciation

Taxman2004 — Sun, 06 Mar 2022 23:44:44 GMT

Thank you again for a response. I apologize if I have not made myself clear. The property was converted from personal use to a rental. Does this make a difference in how you may respond? Or Turbo Tax still can’t handle the situation I described previously?

Thank you for your assistance.

Re: Rental Property Depreciation

PatriciaV — Mon, 07 Mar 2022 15:07:32 GMT

If you have reported this Rental Property in the past and enter the date of the sale, TurboTax should calculate the current year depreciation properly. We advise against overriding calculated values that can cause other problems with your return.

Review your entries under Rental Properties >> Property Profile and Assets/Depreciation to be sure you entered the correct basis at conversion. Even if you have not reported this Rental Property in TurboTax before, you should complete these entries first.

When you have confirmed your entries for the property, follow AmeliesUncle's advice and report that the property was converted to personal use. Be sure to answer all questions that relate to taking the asset out of service, including Special Handling Required.

Although this doesn't follow the facts, reporting the property as converted releases the asset and provides the accumulated depreciation amount. You can now report the sale under Less Common Income >> Sale of Home. In this section, you can use the original cost basis to calculate the gain and report the depreciation you have taken while it was rented, while receiving the benefit of any personal residence exclusion.

Re: Rental Property Depreciation

AmeliesUncle — Tue, 08 Mar 2022 03:17:40 GMT

In the depreciation section, you enter the depreciable Basis, which in your case is the Fair Market Value on the date of conversion.

Then my prior comment is for how to report the sale.