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Level 2
posted Feb 26, 2024 4:29:47 AM

Depreciation of foreign rental property: wrong recovery period

I am using TurboTax online to calculate the depreciation schedule for my foreign rental house that was put on the market in 2023. Although I correctly inserted the foreign address, TurboTax calculates depreciation based on a 27.5-year recovery period (as if it was a US property), instead of a 30-year period. 

 

Have anyone experienced a similar issue or does anyone know how to fix it?

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1 Best answer
Expert Alumni
Feb 26, 2024 9:52:04 AM

Yes, you must use the following steps so that your foreign rental property is depreciated over 40 years.

 

This can be fixed by using the following steps making sure to mark the appropriate selections as you go through the entry of the building and/or improvement on this foreign rental property. Date placed in service and the right selections will provide the correct 40 year depreciation.  Key Steps - number 3 & 4

  1. Sign into your TurboTax account > Search for Schedule E (upper right) > press enter > select the Jump to link
  2. Select the Edit beside the foreign property > Scroll to the Asset(s) and select Edit > Select Yes to go to the asset summary
  3. Select Edit beside the Rental property info to answer the questions about location by selecting Edit under Reservation, disaster, or outside US area.
  4. Select Our property is on an Indian reservation, disaster area, or outside the US > Continue
  5. Select Property assets are located outside of the US or US Possessions > Continue
  6. Select Edit beside the rental unit asset > Continue to Describe the Asset and select 'Rental Real Estate' > Continue to select 'Residential Rental Real Estate'
  7. Next Continue, then check the cost and date placed in service > Continue
  8. Tell us More... select 'I purchased this asset' and 'Yes' I've always used 100% (if applicable) > Continue
  9. Continue to check the prior and current depreciation amounts - TurboTax will be correct using the 40 years

                    

 

1 Replies
Expert Alumni
Feb 26, 2024 9:52:04 AM

Yes, you must use the following steps so that your foreign rental property is depreciated over 40 years.

 

This can be fixed by using the following steps making sure to mark the appropriate selections as you go through the entry of the building and/or improvement on this foreign rental property. Date placed in service and the right selections will provide the correct 40 year depreciation.  Key Steps - number 3 & 4

  1. Sign into your TurboTax account > Search for Schedule E (upper right) > press enter > select the Jump to link
  2. Select the Edit beside the foreign property > Scroll to the Asset(s) and select Edit > Select Yes to go to the asset summary
  3. Select Edit beside the Rental property info to answer the questions about location by selecting Edit under Reservation, disaster, or outside US area.
  4. Select Our property is on an Indian reservation, disaster area, or outside the US > Continue
  5. Select Property assets are located outside of the US or US Possessions > Continue
  6. Select Edit beside the rental unit asset > Continue to Describe the Asset and select 'Rental Real Estate' > Continue to select 'Residential Rental Real Estate'
  7. Next Continue, then check the cost and date placed in service > Continue
  8. Tell us More... select 'I purchased this asset' and 'Yes' I've always used 100% (if applicable) > Continue
  9. Continue to check the prior and current depreciation amounts - TurboTax will be correct using the 40 years