topic Depreciable basis : Generally, depreciation on your renta... in Investors & landlords

Tax Year Prior to 2020: Calculate depreciation for rental property?

chautktran — Mon, 22 May 2023 22:30:15 GMT

Where and how can I calculate depreciation expense for rental properties?

I didn't use turbotax last year. Isn't there a way to jus...

anderjoe5 — Fri, 07 Jun 2019 22:08:00 GMT

I didn't use turbotax last year. Isn't there a way to just enter depreciation without having to recalculate depreciation on property I bought 14 years ago?

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I am not using turbo this year but my CPA needs to know t...

retire2sun — Fri, 07 Jun 2019 22:08:05 GMT

I am not using turbo this year but my CPA needs to know the depreciation schedule turbo used on my Arizona house and Colorado house were do I find it?

Depreciable basis : Generally, depreciation on your renta...

DS30 — Sun, 02 Feb 2020 05:25:28 GMT

Depreciable basis : Generally, depreciation on your rental property is the based on the original cost of the rental asset less the value of the land (because land is not depreciable). The original cost can include various expenses related to the purchase of the property. If you make a capital improvement to the rental property, you will depreciate it using the same useful life of the underlying property. If you don't know the original house and land separate costs, you can use the percentage of house and land to total value listed on your property tax bill to allocate the original cost.

So for example, if you bought a rental property (house and lot) for $148,000, had capitalized purchasing expenses of $2,000 and the cost allocated to the land part of the purchase was $50,000, then your depreciable basis in your rental property is $100,000 ($148,000 + $2,000 - $50,000).

Residential real estate is depreciated over a 27.5 year life on a straight-line basis and used a mid-month conversion (this means that for the month placed in service, no matter what day during the month, you will only get a half of month worth of depreciation for this first month).

Click for more information about depreciation on rental property

You need to enter your rental property as an asset under the asset section of rental properties.

To enter this transaction in TurboTax, log into your tax return and type "rental (schedule e)" in the search bar then select "jump to rental (schedule e)", TurboTax will guide you in entering this information

Alternatively, To enter this transaction in TurboTax Online or Desktop, please follow these steps:

Once you are in your tax return, click on the “Federal Taxes” tab ("Business" tab in TurboTax Home & Business)
Next click on “Wages & Income” ("Business Income and Expense" in TurboTax Home & Business)
Next click on “I’ll choose what I work on”
Scroll down the screen until to come to the section “Rental Properties and Royalties”
Choose “Rental Properties and Royalties” and select “start’ (or “update” is you have already worked on this section)

Enter your rental property information through the TurboTax guided questions (or choose edit rental property if property is already listed) until you come to a screen that is titled, Your "rental property name" rental summary. You will enter your rental property house here under "assets/depreciation".

Under the asset/depreciation section - select start

Select "yes" to "Do you have assets for this property that can be depreciated?
About 3 screens in, you will enter the house as an asset here. This is where your enter all your rental assets (including capital improvements)
For the rental house (or any capital improvements), you will select "Rental real estate property"
Then for the rental house, select "Residential Rental Real Estate"
On the next screen, you will enter information about your Rental property asset including:

Property description - usually street address (type of capital improvement)
Cost - generally what you paid (if this is a conversion of your primary residence, then you would use the lesser of FMV at time of conversion or cost.)
Cost of Land - If cost, as listed above, includes land, put the total amount of land cost here (land is not a depreciable asset)
Date purchased or acquired - this is the original date of purchase or acquisition of the rental house.

On the next screen report purchased new or sold in current year and your business use of the property since acquisition.
You will then get a screen that will confirm prior year deprecation (If asset is over one year old) Just remember that the IRS assumes that you have taken the correct amount of deprecation on your rental asset regardless of if you did or did not). If you change this amount, TurboTax will calculate a new straight line depreciation amount using the new basis information (cost less prior year depreciation) over the assets remaining life.
On screen titled "special handling required?" - select "no"
Then you will get an asset summary page showing current year's deprecation. If you select show detail you can review your entry details.
You can add additional rental assets on the next screen by selecting "add an asset".

Here is a link that can provide you with helpful information related to your rental property

TurboTax - Tips on Real Estate Taxes and Real Property

Please see undated answer including additional screenshots.

DS30 — Fri, 07 Jun 2019 22:08:07 GMT

Please see undated answer including additional screenshots.

@TurboTaxDeeS I turn my primary home into rental home in...

mylikuliku — Fri, 07 Jun 2019 22:08:09 GMT

@TurboTaxDeeS I turn my primary home into rental home in July 2013 and have been using Turbo Tax to file my taxes for 2013, 2014 and now 2015 (Home and Business version). Under "Review Information" for my rental property in 2015 Turbo Tax, I have the "Date" where the property first turned into Rental i.e., 7/4/2013, "Asset Type" to be I-Residential rental real estate, "Cost" was the purchased price of the property when I bought it in May 2007 ($825K). I want to check if this is the correct value I should put under "Cost"? Or it should be the FMV of the property in 2015?

Under "Land", I have $303,500. I can't remember where is value coming from. My property is a Townhouse/Condo. I suspect this amount is coming from the Property Tax document back in 2013 when I first entered into Turbo Tax. My question, is this the right way of doing it?

Finally, I have "Prior Depreciation" to be $23,436. Again, I am not sure how this is being calculated. Please advise.

My Business % this year (2015) is still 100%.

Yes. Cost is the original value of the property when orig...

DS30 — Fri, 07 Jun 2019 22:08:12 GMT

Yes. Cost is the original value of the property when originally purchased (unless the cost was more than the FMV at time of conversion, then you use the FMV). Land portion would be listed separately.

If you are trying to claim the home gain exclusion on this converted rental property, you will need to get all the rental assets to report no gain or loss (you may have to manipulate the sales amounts to get these assets to have no gain or loss). You will then take all prior depreciation (this amount will be generated by TurboTax if you used TurboTax for the entire time this was a rental) and the current year depreciation and add these amounts to get a total for depreciation on this rental.

Now you will need to enter this information under the sale of home section. If you meet the home gain exclusion, the only amount that you will have to pay any capital gains tax on is the recapture of depreciation from the time you used the property as a rental (referred to as a Section 1250 recapture amount). (Remember the IRS will assume that you claimed the correct amount of depreciation every year—this is true regardless of whether you actually claimed any depreciation on your tax return).

To enter the sale of your home in TurboTax Online or Desktop, please follow these steps:
1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
2. Next click on “Wages & Income” ("Personal Income" in TurboTax Home & Business)
3. Next click on “I’ll choose what I work on”
4. Scroll down the screen until to come to the section “Less Common Income”
5. Choose “Sale of Home (gain or loss)” and select “start’
6. You will want to use the "Easy Guide" to determine the adjusted basis on this home
Say "yes" that you sold your main home and TurboTax will guide you on entering this information. You will need:
• The date you sold your home and the selling price (from your closing statement)
• The date you bought your home and the purchase price (from your closing statement)
• The cost of any major improvements you made, so we can deduct them for you
• Form 1099-C if you sold your home at a loss (short sale)

@TurboTaxDeeS I actually didn't sell my rental house yet....

mylikuliku — Fri, 07 Jun 2019 22:08:14 GMT

@TurboTaxDeeS I actually didn't sell my rental house yet. So, do I need to edit the Cost, Land and Depreciation amount of my rental property? The numbers that I stated above are automatically generated in TT from previous years I believe. For example, the depreciation value of $23,436 is automatically generated.

No. Since this information was carried over from a prior...

DS30 — Fri, 07 Jun 2019 22:08:16 GMT

No. Since this information was carried over from a prior year, the cost and land values will stay the same as when you entered them originally (not FMV for 2015). Additionally, the accumulated (or prior year) depreciation amount will also be the correct amount that was allowed on your prior year tax returns.

@TurboTaxDeeS In short, I don't have to do anything in th...

mylikuliku — Fri, 07 Jun 2019 22:08:16 GMT

@TurboTaxDeeS In short, I don't have to do anything in the Assets/Depreciation section since it will be taken care of by TT, correct?

Correct (until you sell the property or add a capital imp...

DS30 — Fri, 07 Jun 2019 22:08:17 GMT

Correct (until you sell the property or add a capital improvement or other depreciable asset).

@TurboTaxDeeS When I checked the Asset Summary under Rent...

mylikuliku — Fri, 07 Jun 2019 22:08:19 GMT

@TurboTaxDeeS When I checked the Asset Summary under Rental Property (screenshot #2), I don't have the line that shows the value of "Cost of Land". I only have Cost/Cost Basis. Is it because my property is a townhouse?

Yes, if you did not put an amount for land cost under the...

DS30 — Fri, 07 Jun 2019 22:08:20 GMT

Yes, if you did not put an amount for land cost under the asset section for this asset (because it was a townhome), then there would be no land cost on this report.

@TurboTaxDeeS Despite my property is a townhouse, the pro...

mylikuliku — Fri, 07 Jun 2019 22:08:23 GMT

@TurboTaxDeeS Despite my property is a townhouse, the property tax bill send to me have the Land Value and the Building Value. Can't I just use the Building Value on the tax bill for the depreciation calculation?

No but you can use the percentage of land and building to...

DS30 — Fri, 07 Jun 2019 22:08:24 GMT

No but you can use the percentage of land and building to total value listed on your tax bill to allocate the original cost (or lower of cost or FMV of the property if a converted main residence) to the land and townhouse values under the asset section.

@TurboTaxDeeS I'm not sure I understood what you mean abo...

mylikuliku — Fri, 07 Jun 2019 22:08:26 GMT

@TurboTaxDeeS I'm not sure I understood what you mean above. My townhouse tax bill has both "Land" and "Improvements" assessed values. In this case, is my Cost of Land still zero (since it is a townhouse) or do I actually have to include the Cost of Land? If yes, how do I determine the Cost of Land?

Re: Calculate depreciation for rental property?

AnnetteB6 — Sun, 02 Feb 2020 20:06:58 GMT

Use the following steps to enter information about your rental property so that it will be depreciated in your tax return. These steps assume that you have already entered some information into your return with regard to your rental income and expenses.

Starting from the Rental Properties and Royalties or the Business Income and Expenses (Schedule C) selection under income, choose Update or Review to get to the details about your rental or business
Proceed to the summary page, then Edit your rental property or business name
Proceed through the questions until you reach the area where you can click Start or Update for the Assets/Depreciation section
Proceed to the point where you adding an asset on the page titled Describe This Asset
If you are entering the rental property itself, enter a description or the property address, then choose the first option on the list, Rental Real Estate Property, then click Continue
On the next page titled, Tell Us a Little More, select Residential Rental Real Estate, then click Continue
Proceed through the remaining screens entering the details about your property so that depreciation can be calculated

@al511

Re: Calculate depreciation for rental property?

rdl — Fri, 28 Feb 2020 07:45:42 GMT

Hi, I run a rental business in an LLC with another member with the 50% split. The rental income and expenses, including the property tax, are handled in the LLC's bank account, but the rental property is still under my name. In that case, do I take the rental property depreciation in my LLC business tax form or do I take it in my personal tax form? Does it matter where the depreciationi is recorded? Also does it impact the 20% QBI deduction amount? Any help is appreciated. Thanks

Re: Calculate depreciation for rental property?

Artist77 — Fri, 28 Feb 2020 20:48:05 GMT

turbo tax is giving me a very high depreciation more than twice the year before