topic Can I change the amount of my rental home depreciation every year? in Investors & landlords

Can I change the amount of my rental home depreciation every year?

fkhalilz — Tue, 04 Jun 2019 20:20:21 GMT

My total income for 2017 tax year was so low that I did not use all of my standard deduction to offset my income from my rental properties. I could only use a portion of the standard deduction to reduce my income to zero.

I have already filed my 2017 taxes, but I was wondering if I should go back and amend it to take less depreciation on my rental properties in order to increase my income and use all of my standard deduction. If I take less depreciation, my adjusted basis for the rental properties will increase and I will have less capital gains tax to pay when I sell the rentals in the future.

So my questions are:

1) Can I choose a smaller depreciation in 2017 for each of my rentals to maximize use of my standard deductions?

2) If so, how do I do this in TT Premier? It does not even prompt me to change this during the interview session.

3) Can I go back to use the max depreciation allowed in the future years as my tax situation changes again?

Thank you!

Taking less depreciation on your rental (or even taking n...

MinhT — Tue, 04 Jun 2019 20:20:24 GMT

Taking less depreciation on your rental (or even taking no depreciation) would not lower your capital gains when you sell your rental home.

In fact, the IRS requires you to recapture all depreciation allowed or allowable when you sell your rental home, and you have to pay tax on the recaptured depreciation at your ordinary income rate (but not to exceed 25%). This means that even if you did not deduct depreciation at all (or less depreciation) whether by error or on purpose, you have to recapture all depreciation allowable, and there is no benefit in taking less depreciation on your rental property.

Thank you!

fkhalilz — Tue, 04 Jun 2019 20:20:26 GMT

Thank you!