calc for depreciaton on rental property does not seem accurate, what am i missing?

[rbyu]

HI,

I did renovations on a rental property.  Most are deemed  improvements using a 27.5 years spread (which is ridiculous.. but whatever).  For example, I upgraded windows at the cost of 8500.  Entering this in turbo tax, the deprecation allowance seems off.. what am i missing? 

TT deprec. is calculated at  296.00 with date use of 1/2/2019 using SL & MM ,100% business use; however, I calculate and get 309.09?  (8500/27.5 years).  Can someone tell me what else TT is doing?

Thanks. vy

[tagteam · Accepted solution]

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@rbyu wrote:

Can someone tell me what else TT is doing?

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TurboTax is using the mid-month convention; the property is treated as if it had been placed in service in the middle of January (i.e. you essentially receive one-half month worth of depreciation for the first month).

See https://www.irs.gov/publications/p946#en_US_2019_publink1000107539

[rbyu]

thanks, it will readjust next year?

[tagteam]

Yes, next year the program will automatically give you the full year (e.g., 8500/27.5).

[rbyu]

hi, thanks again.  Based on what you said, it seems accurate.

Logically, IRS ought to be more precise .. place of service is 1/5/19 which s/b 305.86 IF calculated by days not weeks (11.5).   Anyway, I appreciate your response. 

[Anonymous]

The IRS does not write the tax laws no matter what many think. It's Congress and it specified the mid-month method and the 27.5 year life for residential domestic real estate rental and that land can't be depreciated.    you would be surprised how many times it has changed the depreciable life and at times there were different lives for regular tax and the alternative minimum tax. 

[rbyu]

.. well, whoever write these crazy rules.. regardless.. its from the same source.. FEDERAL.GOV  and IRS enforces / instructs the taxpayers.  My point is... the math could be more precise.

thanks for the feedback.

[tagteam]

This can cut both ways, however. Had your asset been placed in service on January 30th rather than January 2nd, you would still get a depreciation deduction for half of January under the mid-month convention.

[Critter-3]

If you look at the IRS depreciation charts you will see the 3.485%   you need to use which is the same as the one the program uses.  

Page 72 ...  https://www.irs.gov/pub/irs-pdf/p946.pdf