Depreciation basis for partial year rentals - Personal Use Days

[gzmo]

EDIT: I stand corrected. There is fine print that specifically instructs you to not include any days prior to renting out the property as personal use days. See comment below for details.

Hello,

I believe there is a bug in the Turbotax software.

My rental property was rented out for part of the year for the first time in 2021.

Turbotax asked me to input the number of days rented vs number of days for personal use (see screenshot).

Turbotax also applied an adjustment for the partial rental on top of  the IRS adjustment for partial year rentals, arriving at a basis of depreciation far too low.

There is no way for me to adjust this as turbotax recognizes the total depreciable amount (correctly) to be $465,097 (see screenshot 1), but (incorrectly) does both adjustments (see screenshots 3 and 4) behind the scenes. See caption for each screenshot to see reproduction of calculated amounts.

The tax returns have already been accepted so I need help amending this + this should probably be fixed.

Thank you!

465,097 / 27.5 * 0.5863 (turbotax adjustment) * 0.5417 (IRS line 19 adjustment) = 5,371272,686 / 465,097 = 0.5863214 / 365 = 0.5863https://www.irs.gov/instructions/i4562

[RaifH · Accepted solution]

It looks like you converted this property from personal use to rental use in 2021 after living in it for 151 days and then renting it out from June on. If that is the case, you want to mark personal use days as 0. TurboTax determines the basis based on your percentage of business use. If you converted it to a full-time rental in June 2021, your personal use should be 0%.

TurboTax says in the fine print when entering your personal and rental days, "The number of days during the year you lived in this rental property before converting it as a rental do not count as personal use days and should not be entered as personal use during the year."

You are exactly correct, by entering it the way you did, only 58% of the basis is being depreciated because the software thinks this is a vacation property that you still use for personal use 42% of the time. When you file your amended return, you will want to adjust the personal use during the year to 0. That will correct the basis to $465,097. TurboTax will then calculate the correct depreciation deduction using the mid-month convention for the first year the property was used as a rental. 

[gzmo]

I stand corrected! Thank you for pointing me to the fine print, which I obviously missed.

Edited title and post for those making the same mistake as me.