Does non-residential real estate depreciation use 39 yrs?

[Carl]

No. If the property was placed "in service" in 2018 (and not before) then residential rental real estate is depreciated over 27.5 years. If it's commercial business property you own, then it's depreciated over 39 years.
Foreign rental property is depreciated over 30 years *IF* placed in service in 2018.

[TaxGuyBill]

It is still 39 years.  I think you are mixing up that for the Alternative Depreciation System (ADS), Residential Real Estate now uses 30 years rather than 40 years (but the last time I checked, TurboTax incorrectly still uses 40 years).

[tomdanker]

I agree - I have found that the turbo tax program calculates depr for non residential with a depr life of between 40 and 41 yrs.  (40.6). Then when I try to override it  I can’t change it.  I am so frustrated.  Any suggestions?   Is there a turbo tax program person I can call to get a work around?

[TaxGuyBill]

Yes, non-residential real estate that is in the United States is depreciated over 39 years for regular tax purposes, and that is what TurboTax does.

[tomdanker]

It does not calculate it at 39 years And it will not allow me to override it with the correct useful life.  Please anybody help

[TaxGuyBill]

Is it in the United States?  If not, 40 years is correct.

Why do you think it is depreciating it over 40.6 years?  If this is the first year, it only gets a partial amount of depreciation.  Is that what you are confused about?  So yes, a 39 year recovery period actually is depreciated on 40 tax returns, because the first and last year only get a partial year.  When EXACTLY is the "placed in service" date?

[tomdanker]

It’s in US

[tomdanker]

Exactly Jan 1 2018.  A full year of depr should be allowed

[TaxGuyBill]

No, a full year of depreciation is NOT allowed.  As I said before, the first year only gets a partial amount.  The first month only gets a 1/2 month of depreciation, so you should get about 95.833% of a full year of depreciation.  So I suspect that is what you are confused about.

[tomdanker]

You have defined my situation.  I have placed the assert in service at 12:01 am on 1/1/18 and the depr method doesn’t allow for a full year of depr.
My work around is now to place it in service at 11:59 pm on 12/31/17 and I get a full year of depr x.
Thanks for you help

[TaxGuyBill]

Don't just make up when it was placed in service.

If it was actually placed in service on January 1st, enter January 1st and do it correctly.  you can't just say December 31st just because you want a full year of depreciation.  If it actually was placed in service in December 31st, then you should have had a 1/2 month of depreciation on your 2017 tax return, which lowers your Basis of the property.  In that case you may consider amending 2017 because when the property is sold at a gain, you WILL pay tax on the depreciation, regardless if you took that 1/2 month of depreciation or not.

Again, don't just make up numbers; do it right.  

[Carl]

"My work around is now to place it in service at 11:59 pm on 12/31/17 and I get a full year of depr "
Your work around is literally screaming for an IRS audit, that will $cost$ you dearly 24-36 months down the road when the IRS catches it - and rest assured they will catch it.

[tomdanker]

I agree that his is not a good situation
Why can’t TurboTax use 1/2/18 as the start of the mid month convention
If I take in revenue on 1/1 it seems like I should be able to record a full year of depreciation

[TaxGuyBill]

Because the LAW says you must use the mid-month convention, which means a placed in service date of 1/1/18 gets a 1/2 month of depreciation.

As I said before, do it right and you will get 1/2 month of depreciation for January.  There is nothing wrong with that.  Don't be concerned that it is not a 'full' year, as the LAW says that is how it NEEDS to be.  Just let the program do the correct calculation.