Depreciation

Forum|Forum|2 years ago
November 15, 2023
10 replies
60 views

I own 50% of a house and bulding bought in Oct 2017 and rented since Nov 1, 2017, We have never claimed depreciation. I would like to amend my 2020, 2021, and 2022 returns to include depreciation and then claim depreciation in the future. The purchase price of property was 210,474. the value of the land (from the 2018 tax bill= 71,330) I used 139,144 as the cost basis for building and house. 139,144 divided by 27.5 would be 5,059.78

1/2 depreciation for one year would be $2,529.89 Is that correct for 2020 for a property purchased in 2017?

Anonymous_

Level 15

Unfortunately, it is now too late to amend those returns since you used an impermissible accounting method by not taking depreciation deductions for two or more consecutive tax years.

As a result, you need to file Form 3115 and make a 481(a) adjustment.

See https://www.irs.gov/instructions/i3115#en_US_202212_publink100035791

You will most likely need to use a tax professional for this purpose.

Christine HopeAuthor

Level 2

I believe you but I have talked to two tax professional who suggest filing amended returns for 2020, 2021, and 2022. I have yet to find a professional who can file Form 3115 .

If I do amend the returns will TUrbotax use the correct depreciation amount assuming I have filed since 2017 or do I need to do my own math.

I am willing to try filling out Form 3115 if I must but would love someone to make available an example of a very simple depreciation for a single house rental

Anonymous_

Level 15

You can try the Assisted or Full Service options with one of the online versions.

https://turbotax.intuit.com/personal-taxes/online

Christine HopeAuthor

Level 2

I understand that I need to file or have a professional file form 3115 since depreciation has not been taken on a rental property. I am trying to decide if it is worth it.

The rental property was bought in Oct 2017 and rented continuously since that time. THe value of the house and improvements is 52,570. I think that means that we should have taken $1,911.64 in depreciation each year. Does filing the Form 3115 means that we will get back $1,911.64 for 2018-2022?

SIncerely,

Hope Stanton

Anonymous_

Level 15

@Christine Hope

You will get a deduction for that amount, but you won't "get it back" in terms of a refund (if that's what you mean).

Christine HopeAuthor

Level 2

I am having a CPA file the 3115 form. If the expenses associated with the rental property are greater than the income received in the year the 3115 form is filed what happens? Can the additional income be added to expenses for 2024?

For example:

Rental property

INcome $18,000

Deductions (Taxes, Insurance, Maintenance and repair) $6,000

Depreciation $13,000

IN this hypothetical case I would have $1,000 negative value for income for the property for 2023. Property rented Nov 2017

affordable2020

Level 7

Regardless of whether you take depreciation deduction you will still need to recapture the depreciation that should have been taken when you sell the property.