I'm not sure whether TurboTax Home and Business is giving me the correct calculations for a vacation home (Dwelling Unit Used as a Home as per pub 527) with both rental and personal days.
I will use an extreme example to illustrate the problem.
Say the home was purchased on 01/01/2000 for $120k with a land value of $20k. It was put in service on 01/01/2000 and used 100% for business between 2000-2017 (no personal use during this time).
Cost basis: $100k
Prior depreciation: $65,302
Now let's say that this property was rented at fair market value for 100 days, and used for personal use for 100 days in 2018 (assume it was available for rent but not rented for the remaining 165 days). So the business use is 50% for 2018.
If I enter this data into TT, it calculates $0 depreciation for 2018 because it uses a cost basis of $50k and the prior depreciation is already more than this.
I think it should be calculated as follows:
Cost basis: $100,000
Prior depreciation: $65,302
Adjusted cost basis: $34,698
2018 depreciation: $34,698 * 1/(27.5-17-11.5/12) * 0.5 = $1,818
I think the cost basis should remain as $100k and the 50% ratio should be applied after doing the normal calculation for depreciation.
I would be interested to hear other people's opinions on this because I can't find any definite answer.
