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YogaGirl25
Level 2

For "Home Sale - Adjusted Basis of Home Sold: AMT Depreciation must be entered". How do I calculate AMT Deprecation if I did not write off depreciation prior years?

 
5 Replies
DianeC958
Expert Alumni

For "Home Sale - Adjusted Basis of Home Sold: AMT Depreciation must be entered". How do I calculate AMT Deprecation if I did not write off depreciation prior years?

If this is a rental home the amount of depreciation you could have taken needs to be figured to  reduce your basis in the rental home even if you did not take the depreciation.  The amount for AMT depreciation would be the same amount as the regular depreciation since the regular depreciation is figured with Straight Line Depreciation and not an accelerated depreciation amount.

 

If you did not take the depreciation in prior years on a rental property you can file form 3115 Application for Change in Accounting Method to receive the deduction for the depreciation in the current year.  TurboTax does not support this form so you would need to find a tax preparer that knows how to file this form with your return so you do not miss out on this deduction.

 

About Form 3115 Application for Change in Accounting Method

 

If you sold your personal residence you cannot take depreciation on a personal residence unless you have a home office that you have claimed on your tax return and the same things applies to depreciation for the home office like it does for the rental property.

 

 

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TaxNye77
Returning Member

For "Home Sale - Adjusted Basis of Home Sold: AMT Depreciation must be entered". How do I calculate AMT Deprecation if I did not write off depreciation prior years?

 Thanks,  by the way, what if  There has never been a profit on rental property, and  due to passive activity limitations, there would be no benefit to claim the depreciation.  There is no income to reduce. Its at zero and cannot go below zero because regular income is too high. Do a Change form still need to be filed if no depreciation expenses is being claimed?  I understand about  basis adjustment for sale, but there is no requirement to claim the expense is there, especially when there is no benefit ??

DianeW777
Expert Alumni

For "Home Sale - Adjusted Basis of Home Sold: AMT Depreciation must be entered". How do I calculate AMT Deprecation if I did not write off depreciation prior years?

Yes. The IRS rule is depreciation allowed or allowable regardless if you actually take the depreciation. This means at the time of sale the gain will include the depreciation adjustment whether or not you use it. In the year of sale, it will be too late to make the request the change.

 

Any passive losses that remain unused (carryover) at the time of sale or disposition can be used in that year.

 

[Edited: 02/16/2021 | 7:05 PST]

TaxNye77
Returning Member

For "Home Sale - Adjusted Basis of Home Sold: AMT Depreciation must be entered". How do I calculate AMT Deprecation if I did not write off depreciation prior years?

Thanks Dianne, per IRS.Gov that requirement is,  All allowed or allowable depreciation must be considered at the time of sale. for the purpose of calculating, the taxable basis and gain or loss on disposition of the asset. correct?   Is their a rule that requires this to be done to reduce the profit or loss of rental property?  All I see are things that say your allowed to, bur nothing says you are required to.     I get it that its a smart practice, but there is nothing saying I have too.   I do understand that its required to get the right basis but I do not have to claim it as an expenses,  if I don/t get a benefit for it, correct?    I just should keep records of when the property went in to service and plan to decrease the basis of the rental property by the amount of depreciation I COULD have claimed to get to the basis of my gain or loss on that sale.   

 

I have been told I need to go back and file amended returns for this. There is no reason , I have losses every year,  I make well over 500k , They are losses.  I have no profit to reduce, I can't claim any losses, so why would I have to go through the work to create these and send them to the IRS?  The IRS is not supposed to keep my records of depreciation  I am.  The IRS rule 308 tells me what needs to be filed in regards to an amended return and since nothing changes on my previous 1040,  aka no income or tax or refund or amount owed or change in status , nothing per rule 308 happens, so there is not Legal required reason to do it this way.  If there is please show me the IRS code/ reference that says this is required to be deducted as an expense off the income.  As far as I can tell there is nothing of that sort, only things that say you should, you can, you may, but nothing that says this is required.

ErnieS0
Expert Alumni

For "Home Sale - Adjusted Basis of Home Sold: AMT Depreciation must be entered". How do I calculate AMT Deprecation if I did not write off depreciation prior years?

@Thomasnye The IRS specifically says you must include deprecation allowed or allowable as part of your sale calculation.

 

Refer to: I have a home office. Can I deduct expenses like mortgage, utilities, etc., but not deduct depreciat...

 

Further the IRS says:

 

You must reduce the basis of property by the depreciation allowed or allowable, whichever is greater. Depreciation allowed is depreciation you actually deducted (from which you received a tax benefit). Depreciation allowable is depreciation you are entitled to deduct. If you do not claim depreciation you are entitled to deduct, you must still reduce the basis of the property by the full amount of depreciation allowable. If you deduct more depreciation than you should, you must reduce your basis by any amount deducted from which you received a tax benefit (the depreciation allowed).

 

Refer to Basis adjustment for depreciation allowed or allowable in Publication 946 (2019), How To Depreciate Property

 

As @DianeC958 says, you can file Form 3115 in the year of sale instead of amending your returns.

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