depreciation life bug?

[9month9wine]

Hi,

For the same rental property put in service before 2020, the depreciation life in Form 4562 is 30 years, same as last year. But the depreciation life in Form 3855A is 40 years, last year was 30 years. Is this a TurboTax bug? How to fix it? 

Please help!

Thanks,

Belinda

[AmyC]

We are not able to see you returns from last year or this year to know how you answered questions, assets in place, etc. There is a difference between CA and Fed depreciation. I ask that you please take your two returns and look at the Instructions with the difference here.

Once you determine which return is not correct, you can either amend last year's or correct this year's.

You may need   FTB Publication 1001.

[9month9wine]

Hi Amy,

Thank you for your response.

My oversea residential rental property was put into service in 2019. My understanding is that, the depreciation life is 30 years for the service started after 2018. Please refer to the other TurboTax Community message response here, https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/foreign-rental-proper... 

If this is not TurboTax bug in 2022, do you know which page/question in TurboTax Wizard impacted the depreciation life? Maybe our answer is not consistent from last year. 

Thanks,

Belinda

[DaveF1006]

No, it is still 30 years for property placed in service after 2018.  

It would be helpful to have a TurboTax ".tax2022" file that is experiencing this issue.

You can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions: 

If using Turbo Tax online:

1. Click on Tax Tools in the left menu bar
2. Click on Tools>share my file with agent
3. press ok and you should get a token number

If using the software:

At the top menu in the black line at the top of the page go to Online. 

1. From the menu, select Send Tax File to Agent. 
2. You will see a message explaining what the diagnostic copy is. Click Send and then you will get a Token number. 
3. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

@9month9wine 

[9month9wine]

Hi Dave,

Thank you for your help. I followed your instruction and sent the file. Token number is 1112489. 

I have an oversea rental property put into service after 2018.  There are two Form 3885A, the one with Title "Depreciation and Amortization Report" using 40 years as depreciation life. The one with Title "Alternative Minimum Tax Depreciation Report" using 30 years as depreciation life. The depreciation value difference is $2312 which is added to my California Income.

My question is, why using 30 years as depreciation life for the rental property put into service after 2018?

Why the difference of depreciation value (caused by 30 years depreciation life calculation) added to my California income?

Please take a look and advise. Appreciate!

Thanks,

Belinda

[DaveF1006]

We currently have an investigation team looking into this because of the difference between the California Schedules and the federal schedules. Federal reports it correctly at 30-year but California is reporting at 40-year causing a income adjustment addition to California income.

This may be reported correctly but we need confirmation on this before we can advise.  Sorry for the delay and please wait a few days before receiving an answer.  This is a small team that has a few of investigations to complete.

[9month9wine]

Thank you Dave. We are currently waiting for this issue to be resolved in order to file the return. Please let us know as soon as possible.

Thanks,

Belinda

[e70fe70f]

Hi Dave, as we are approaching the tax return due date, wondering if team's investigation could be expedited? Looking forward to your update. Thanks!

[AnnetteB6 · Accepted solution]

After further research, a resource was found that verifies the way TurboTax is handling the depreciation for the foreign rental property on the California return.  

When the Federal tax law changed in 2017 due to the Tax Cuts and Jobs Act to shorten the recovery period for foreign rental properties from 40 years to 30 years, California state law did not conform to this change.  They opted to keep the longer recovery period and then report the difference between the Federal depreciation and the California allowed depreciation as an adjustment on the California return.  So, therefore, TurboTax calculates it both ways for the California return and includes the difference as an adjustment.

For your reference, here is a link to the document that states the Federal change in recovery period (see page 158 or the screenshot below) and then later the fact that California does not conform to the change (see page 159 or the screenshot below):  Summary of Federal Income Tax Changes 2017

@e70fe70f 

@9month9wine