How to switch to straight-line depreciation method?

[Daniel_284]

Hi there,

I am using TurboTax Home & Business 2021 on an iMac.

I've added 5 new assets under my Schedule C business, and they are being depreciated over 5 years.

However, I think TurboTax defaults to using MACRS depreciation method, and I'd like to switch these to use a simple straight-line depreciation method.

Is there a way to switch between methods, and will it continue to track the chosen method into future years?

Thanks,

-Daniel

[ThomasM125 · Accepted solution]

You could add the asset as an "Intangible" which would allow you to depreciate it over a period of 3, 5, 7, 10 years or longer on a straight line basis.  You would have to use a term that would be appropriate for the asset, taking into consideration it's useful life. The method chosen would be applied consistently in future years by TurboTax. You would have to use the same method of depreciation for all assets of the same class.

[Daniel_284]

Thank you, that's very helpful. A follow-up:

These assets were marked "A - Computer" under "Type of asset"... Now they are marked "O - Other."

Is there a way to continue to mark them as "A - Computer" while switching to straight-line? Or, is it just a limitation of the software that this isn't possible?

Thanks,

-Daniel

[Carl]

If you were already depreciating the asset prior to 2021, you can't change your depreciation method mid-stream without filing IRS Form 3115-Change in Accounting Method. That form is not simple by any stretch either.

Is there a way to continue to mark them as "A - Computer" while switching to straight-line?

No. That's why you are asked for a description for the asset.

[Daniel_284]

Thank you. These are all new as of 2021.

Should the description be general, for example "Digital Audio Workstation Computer 1"

or specific, for example "Dell Precision 3650 Serial #..."?

Not much room to fit a lot in there...

Thanks,

-Daniel

[Carl]

It's not really necessary to get all that specific on the asset description. The important thing is that the description fits the MACRS classification selected for that asset.

For example, if you purchased chairs, desks and filing cabinets for an office, which is 5-year property, you can just label it as "office furniture" and you're fine since all office furniture is classified as 5-year property under MACRS.

[Daniel_284]

I get that for all 5-year assets I add this year, they have to have the same depreciation method.

But what about in future years - Next year can my 2021 cohort continue with their SL (straight line) depreciation, while a new cohort of 2022 purchased 5-year assets use MACRS?

Or it always must be the same method for all 5-year assets regardless of their age? 

Thanks,

-Daniel

[Carl]

You can not change your depreciation method or timeline mid stream, unless it's determined you are using an impermissible method. Then it requires IRS Form 3115 to change from an impermissible method, to a permissible method.