How does TT calculate first year depreciation for parking lot?

[gedgar]

I added a $15,000 parking lot late last year (Sept. 2015). I added a "land improvement" asset and TT calculated $750 for my expense (yes, I am still doing my 2015 taxes).

See attachment for Asset Summary.

That doesn't make sense - it should be cost divided by years of depreciation (15 years), so that's $1000 per year, but since it was done during the second half of the year, the depreciation should be half that amount, right?

How is TT coming up with $750 depreciated expense for the first year?

[Critter]

The program is correct since you are using the MACRS HY 150DB method for a class life of 15 years  and not a straight line method. See the charts on pages 71 & 75 for the HY & SL options.  https://www.irs.gov/pub/irs-pdf/p946.pdf

SL would be 15000 x 3.33% = 500

[Critter]

PS ... it actually takes 16 years to depreciate a 15 year asset ... long gone are the Pre Reagan days where it was a simple division.

[Hal_Al]

HY -half year convention
150DB -150% of Declining balance

$15,000 / 15 yrs = $1000
1000 x 1/2 yr = $500
500 x 1.50 = 750

[SweetieJean]

DB = Declining Balance

[gedgar]

I was good up until the $500. Why did you do 500 x 1.5?

[Hal_Al]

You're allowed 150% of the amount allowed by the straight line method

[gedgar]

Can I force SL vs MACRS with TT?

[Critter]

Yes but why ?   In about 7 years the depreciation deduction will be less than SL.

[gedgar]

I already carry over deductions - there's no need for me to accelerate any of my assets.

[Critter]

Ahh ... yes.

Well you can ... TT keeps this option hidden so that users don't make it accidentally.  The path you need to take is this ...

Edit your asset >> On the "describe this asset" screen DO NOT choose Rental real estate ... instead choose the last category "intangibles" >> then "other asset type" >> continue 2 screens >> asset class choose 15 yr >> depreciation method screen ... choose SL or ADS to stretch it further over 20 years.

[gedgar]

You're awesome. Thanks.