topic Re: My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up? in Investors & landlords

My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up?

ming3 — Mon, 23 Feb 2026 13:20:11 GMT

For example, if the original cost is $200,000. It has been depreciated for a few years (say, depreciated $20,000 already). Now the Fair Market Value on the day of her death is $400,000. What should I do in Turbotax to step up the cost basis to get more depreciation? Should I simply change the original Cost Basis (i.e. $200 k) to the new step up'd cost basis of $300 k (i.e. 50% step up)? How about the amount that has already been depreciated in prior years (i.e. the $20,000)? Should I cut it in half (So the new depreciated amount will be $10,000) since my wife's part should be wiped off?

Re: My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up?

Carl — Sun, 05 Feb 2023 13:47:19 GMT

I'm sorry for your loss.

Should I simply change the original Cost Basis (i.e. $200 k) to the new step up'd cost basis of $300 k (i.e. 50% step up)?

No. Absolutely not. If you change the cost of "ANYTHING" in the existing asset, you will completely mess up the depreciation history, as well as the current year depreciation. Under no circumstances and with no exceptions do you every change the original cost basis entry of any asset. No exceptions.

What should I do in Turbotax to step up the cost basis to get more depreciation?

You simply enter a 2nd asset with a cost basis that is the amount of the step-up. Remember, the cost basis of the land steps up too. So if the original cost basis on the property was $200K with 50K allocated to the land, lets say the new cost basis is $300K.

Since the original cost basis allocated 1/4 of the total to the land, you must do the same with the step-up. You'll enter a new asset with a cost of $100K in the COST box, and $25K in the COST OF LAND box. The program (not you) will do the math and allocated 3/4 ($75K) to the structure. You can call the new entry whatever you want, so you know what it is. But it's classified as Residential Rental Real Estate in MACRS with an in service date equal to the date of passing, and depreciation on that stepepd up basis will be over the next 27.5 years starting on the date of her passing. So the first year depreciation on that will be pro-rated based on the date of passive/in service date.

Re: My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up?

Anonymous_ — Thu, 19 Dec 2024 00:33:54 GMT

Re: My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up?

ming3 — Sun, 05 Feb 2023 15:45:21 GMT

I am in FL, which is not a community property state. So, I will only get 50%. But thank you for your reply!

Re: My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up?

ming3 — Sun, 05 Feb 2023 17:11:12 GMT

Hi Carl,

Thank you for your detailed reply!

I just want to confirm my understanding is correct:

1. From now on, a single property will become 2 assets in Turbotax for all coming years until the property is sold. The 1st one is the original which will not be changed at all, the 2nd one is just the step up portion of the same real property. These two will always be kept separately in Turbotax. Is that right?

2. Do I need to prorate all my expenses, one by one, between these two assets every year? Can I leave everything to the original asset as before, and put nothing (No income, no expense) in the newly created "step up" asset? This way, the "step up" asset will only have depreciation but nothing else. Turbotax will automatically combine all rental assets when calculating total rental income and tax, so to me, the end result will be the same and it will save me a lot of time to prorate and divide all expenses between these two assets every year. Is this allowed?

Thank you for your help!

Re: My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up?

Anonymous_ — Thu, 19 Dec 2024 00:34:08 GMT

Re: My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up?

Carl — Sun, 05 Feb 2023 20:15:18 GMT

You really need to stop over thinking this, as all you're doing is creating problems in your mind, that do not exist in reality.

Spot on correct.

2. Do I need to prorate all my expenses, one by one, between these two assets every year?

No. In fact, that's not possible. You have "ONE SINGLE PROPERTY" that is split in to two separate assets. Everything will show up on the SCH E as a single property under column A of the SCH E.

Can I leave everything to the original asset as before, and put nothing (No income, no expense) in the newly created "step up" asset?

Again, you are confusing yourself. Expenses aren't taken against a single asset. Expenses are taken against "the business" (rental property *is* a type of business) as a whole. If you change 'ANYTHING" on the original asset entry, you will screw up the depreciation history, and because of that the current year's depreciation will also be flat out wrong.

This way, the "step up" asset will only have depreciation but nothing else.

Just like the originaly asset entry will have "only depreciation but nothing else", as it has since day 1 when you entered it.

Turbotax will automatically combine all rental assets when calculating total rental income and tax, so to me, the end result will be the same and it will save me a lot of time to prorate and divide all expenses between these two assets every year. Is this allowed?

Allowed? You're not breaking any laws here. This is how you do it, and the easiest way to do it "correctly" in TurboTax. Remember, the IRS doesn't care about "how" you arrive at your figures. They only care that you report the "correct" figures.

Re: My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up?

ming3 — Sun, 05 Feb 2023 22:31:36 GMT

Hi Carl,

I am more confused.

Actually, I have two rental properties (Say A and B). Now as you said, I need to add the step up portion as a separated asset for both of them.

Say for property A, how can I add the Step Up asset and let Turbotax know this asset will go with the original asset for property A, but not go under property B? Which page in Turbotax online will allow me to add an additional asset to an existing property (So the newly added asset will go with the existing asset into the same column in Schedule E)?

Thanks!

Re: My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up?

AmeliesUncle — Mon, 11 Sep 2023 19:34:47 GMT

For this year, each existing "asset" (for both properties) should actually be turned into THREE assets.

A new one with 50% of the original Basis, 50% of the "prior depreciation" and the original placed in service date. This is 'your' portion that you have previously owned and will continue to depreciate.
A new one with 50% of the original Basis, 50% of the "prior depreciation" and the original placed in service date. Mark that "asset" as "disposed" and say you converted it to personal use on the date of your wife's death. That is your wife's portion before she died. This one will not carry forward to future years.
A new one with 50% of the Fair Market Value on the date of your wife's death. The "placed in service" date would be the date of your wife's death. This is the stepped-up 50% that belonged to your wife.

After you are sure you have all of the new information, delete the old asset.

Re: My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up?

Anonymous_ — Thu, 19 Dec 2024 00:34:24 GMT

Re: My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up?

Carl — Mon, 06 Feb 2023 00:27:00 GMT

It is impossible in the program, to add an asset to more than one rental at a time.

Select the Rental & Royalty Income (SCH E) section of the program. Work through to the list that shows your two rental properties. Elect to Edit/Update any one of the properties. Work through to the screen that shows rental income, rental expenses, assets, etc. Elect to Edit/Update the Assets/Depreciation section. In the list of assets, you will see at a minimum the property itself listed there. On that same screen you will see a button for "ADD ANOTHER ASSET". Click that button and add the asset. This will add your asset to that one property only.

Do the same thing for the 2nd property.

Re: My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up?

AmeliesUncle — Mon, 06 Feb 2023 00:45:08 GMT

WAIT! I'm going to edit my prior post. It is wrong. There are two ways of doing it (the way I'm going to describe above is the much better way of doing it) and I was garbling my thoughts and incorrectly combined the methods. Wait a few minutes until you read it. 🙂

EDIT: Okay, my original post is fixed now. 🙂

Re: My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up?

Anonymous_ — Thu, 19 Dec 2024 00:34:39 GMT

Re: My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up?

AmeliesUncle — Mon, 06 Feb 2023 01:13:57 GMT

@Anonymous_ wrote:
@AmeliesUncle wrote:
EDIT: Okay, my original post is fixed now. 🙂
OK, so you just added an asset that is simultaneously disposed of in the program, but the other two are exactly the same.

My original post showed to have a Joint asset, but then I incorrectly also said that the OP's 50% is depreciated using the original placed in service date. That would incorrectly give some double-depreciation.

My corrected description essentially just replaces the old/original asset with two 50% assets. Then the wife's 50% is further divided between pre-death and post-death.

Re: My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up?

ming3 — Mon, 06 Feb 2023 01:36:56 GMT

@Carl, @Anonymous_, @AmeliesUncle,

Thanks for all of you!! Now I think I understand what you have mentioned.

In an existing property, under Assets section -> select Rental Property, click Edit button, then:

- Add a new asset, which could be called like "Step up".

- Put in all the info:

* The description could be the same as the original address, plus "Step up"

* The total cost (including land) should be (Fair Market Value - Original Purchase Cost) x 50%

* The date acquired should be my wife's date of death

That's all I need to do (And do it one by one for all my rental properties).

Please correct me if I am wrong. Thanks again!

Re: My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up?

Carl — Mon, 06 Feb 2023 02:45:49 GMT

Please correct me if I am wrong. Thanks again!

That's pretty much it. Isn't it wonderful when everything just "clicks"? 🙂

However, I noted something that @AmeliesUncle pointed out about how you'll end up with three entries in the assets/depreciation section. Doing it the way he says (which is actually more correct) you'll still end up with only two entries per property in the assets/depreciation section.

After thinking about it and looking at a few IRS "tax topics" (can't find the actual publication), his way is the better and more correct way. But if you'll end up selling the property before the original asset entry for each property is fully depreciated, it won't make "that much" of a difference. Still, I would do it his way. If you need details on that, just let us know. I'll do my best to explain and clarify things in plain English as best I can.

Re: My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up?

ming3 — Mon, 06 Feb 2023 04:59:21 GMT

@Carl , @AmeliesUncle

I think I follow what you said - Using AmeliesUncle's method, for each property, I will have 3 assets for 2022, and 2 assets going forward to future years. That method has two advantages:

1. Everything under my wife, including both her original 50% and the stepped up portion, will start depreciation from this year. Whatever already depreciated in prior years will be wiped off (For her part only).

2. Since the depreciation of my wife's entire new asset starts this year, the counting of the depreciated years will be reset to 0 and continue for another 27.5 years for both her original 50% and her stepped up portion.

Is this correct? Thanks to both of you!

Re: My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up?

ming3 — Mon, 06 Feb 2023 15:56:24 GMT

@Carl, @AmeliesUncle,

Hi,

I am about to create 3 new assets and delete the old jointly owned asset in my property as suggested by AmeliesUncle yesterday.

However, Turbotax says: "The only time you should change any prior year asset information is if it does not accurately reflect the information in your prior year return, or if your business use drops to 50% or less". And Carl also mentioned at the very beginning yesterday that I should not change "ANYTHING" in the existing asset - No exception!

I don't want to take the risk, and would like to double confirm with your people that replacing the existing asset with the 3 new ones, as AmeliesUncle suggested, is the way to go.

In my last message, I listed two advantages of using AmeliesUncle's method vs the original method from Carl. I hope those are correct.

Please advise. Thanks again!

Re: My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up?

AmeliesUncle — Mon, 06 Feb 2023 16:40:30 GMT

Yes, that is correct.

The original asset is not really valid anymore because of the 'step up', so something needs to be changed.

Re: My wife died in 2022. In Turbotax, how can I Step Up the cost base of our rental property to get more depreciation? Can I update the original Cost to reflect the Step Up?

Carl — Mon, 06 Feb 2023 17:59:29 GMT

I am also assuming you live in a community property state where you get to step up 50% of the value, and your wife's share of depreciation basically just "evaporates". Lets look at the asset/depreciation list of any one property. I'll call that property A for now.

As you start working through the property you'll come to a screen, "Do any of these situations apply to this property?" Change nothing on that screen and just continue working through.

Elect to Edit/Update the Assets/Depreciation section and work through to the "Your Property Assets" screen.

In there, you have one single asset which is the property itself. Elect to edit it and start working it through.

On the "review information" screen, change nothing. Doing so "WILL" screw up the depreciation history, big time.

Write down the amounts in the COST and the COST OF LAND box, and do the math to figure out what percentage of the COST is allocated to the land. You'll need that percentage figure later.

Also write down the amount shown in the "prior deprec." box, as you will need it too. Then continue.

On the screen "Did you stop using this asset in 2022?" click YES.

On the "Disposition Information" screen enter the date of your wife's passing, and continue.

On the "Special Handling Required?" screen, click YES. (If you click NO, then you will be *FORCED* to enter sales information. Obviously, you did not sell this property.)

On the screen "Depreciation Deduction Amount" you will see the depreciation deduction for tax year 2022 only up to the date of your wife's passing. Write that figure down. You need it. Then continue.

Now to get the numbers you need for entering a new asset.

Start by figuring the "temporary" new cost basis.

Begin by adding together the "prior deprec." and the 2022 depreciation amount. This gives you the total amount of depreciation taken up to the date of her passing. Divide that total by 2 to get the depreciation amount allocated to each of you. (Your wife's depreciation "evaporates". Your share does not.)

Now subtract your share of the depreciation from the amount you wrote down that was in the COST box. This gives you your new (temporary) cost basis. Take note at this point, the amount allocated to the land (in the COST OF LAND box) does not change yet. (but it will)

Now to that new COST, add your stepped up basis and write down that total labeling it something like "New Cost Basis" or whatever.

Remember that percentage you got earlier? Multiply the New Cost Basis by that percentage, to give you the stepped up value of the land.

In TurboTax, click the Add Another Asset button to add the property anew with an "in service" date that is one day after your wife's passing. MACRS class is Residential Rental Real estate of course, and you'll enter your newly figured amounts in the COST and COST OF LAND boxes. Depreciation starts over from year 0 and of course will be pro-rated based on this new "in service" date.

Now if you have any other assets listed for this property, the same basic procedure applies to those other assets. But more than likely you won't have to deal with COST OF LAND on those other assets. That'll make it easy.

Once done with property A, perform the same acts above for property B.

This is why I can't understand why @AmeliesUncle is saying you'll have 3 entries for each property. If the only thing listed in the Assets/Depreciation section is the property itself, I would expect only 2 entries. The original old entry where depreciation stops on the date of your wife's passing, and the new entry with a stepped up cost basis and depreciation starts anew the day after her passing.