Sale of rental asset worksheet

[kristinelise57]

I sold a rental home. One of the assets associated with the house was a patio I had installed in 2009. I took a section 179 that year. In filling out the disposition of the patio, it correctly indicated the amount of 179 deduction I took in 2009, and the total depreciation taken thus far. But when I check my return, I get a "check this entry" that says eligible sec 179 should be blank because it only applies to current year. But TT clearly stated that I had taken the sec 179 in 2009, not this year. I had other assets (appliances, etc) that I filled out in exactly the same way, and none of these triggered the same message, even though I had taken 179 on all of them. 

[MarilynG1]

If you took a 179 Deduction for an expense in the year it was incurred, you don't also depreciate it.  

The 179 Deduction is a one-time deduction that is used to fully expense an item, rather than depreciate it over time as an Asset, so these items should be removed as 'Assets' for your Rental Property. 

Click this link for more info on the 179 Deduction.

This link gives info on How to Report Sale of Rental Property. 

[kristinelise57]

So, you're saying that once an asset is fully depreciated I can just delete it from the rental? I don't have to list it as "sold" or otherwise disposed of?

[ToddL99 · Accepted solution]

No, you should not delete a rental property asset just because it has been fully depreciated. As long as it is still in service, the asset remains an important part of your rental property's financial records.

If you sell (or dispose) of any rental property asset, then you would need to report that sale (or disposal) on your tax return. If an item is fully depreciated, then all the proceeds from the sale will be taxable. You would report the sale of an individual asset in You can report the sale in the Assets / Depreciation interview of the Business Income and Expenses > Rental Properties and Royalties section.

If you sell the entire rental property, you will report the sale in the same interview. For additional guidance, see: I sold my rental property. How do I report that? If selling the entire property, along with its associated assets (e.g. appliances, floor coverings, improvements, etc.) you will have to allocate the total sales price to the assets you are selling. The following post discusses this process: Sold my rental property

[44619herman]

Hello: I sold my rental house in Feb. 2021 and started to do a "Estimated 2021 tax return" so I can estimate my 2021 quarterly payments to the Federal and State government. In working through the various asset worksheets, I noticed that I have about 5 of the assets (dishwasher, driveway, porch, etc)  that were fully depreciated over their asset life. I had owned the rental house for 38 years and had to replace several items when they wore out or needed replacing.  The depreciation and amortization report (form 4562) still shows them as an asset, even though they no longer on the property. In hindsight, I should have disposed them in the year that they were replaced.

My question, is as follows: Should I answer that I disposed of the these assets in my tax year 2020, since I never did, or just wait until tax year 2021 and dispose of all the assets including the ones that still have remaining depreciation on them. From a tax point, I don't think it really matters, since I had some of these assets on the worksheet showing that they were totally depreciated years ago and nothing is being further depreciated. However, because I never disposed of the asset, the depreciation report doesn't have a code "S" for sold on it.  Just wondering, what would you do. Close out these assets in 2020 or next year? 

[DaveF1006]

It depends. As you mention, you can dispose of them next year or this year. It won't make any difference in your return since your fully depreciated assets had no value when you disposed them.. 

For the remaining assets, you can allocate or assign a portion of your sales proceeds to your remaining assets or assign a zero value to these and allocate the full amount of your sales proceeds to your house. Please review this Turbo Tax link for more information.