Form 4562

[OwenUlph]

On Form 4562, when I enter the depreciation deduction for residential rental property put into service in the middle of the year, do I put the amount of the annual deduction or the amount of the deduction for the period of time the property was in service. EG. If the annual deduction is 1,000 and the property is placed in service July 1, do I put in $1,000 or $500. My concern is since Form 4562 is filed only the first year the property is in service, the next year when I deduct $1,000 for the full year the IRS will not allow it because I declared just $500 the prior year. Or should I file another Form 4562 the next year … or every year? Please help. Thank you.

[pk]

@OwenUlph , I am not sure  how you are ending up doing the form by yourself.

Generally, when you tell TurboTax that you have rental income  ( generally business income ) , it will walk you through the filling out of the form.  All you answer  are things like,  total cost of acquisition, cost attributable to land  ( non depreciable )  , when did you put it in service ( generally the day you declared your intention by advertising for rent ) etc. etc.   These bits of information lets Turbo prepare the depreciation schedule  based on service life and MACRS convention to compute the  current year depreciation.  So please could you tell me  how did you end up doing the  form ( by hand ? ).

Also Turbo will maintain ( year after year ) the depreciation  schedule including accumulated depreciation  for purposes of  ordinary vs. capital treatment of gain when the property is disposed.

I am assuming here that you are using the downloaded/ C D version of  Home & Business  for the year 2023.

I will circle back once I hear from you 

[OwenUlph]

Thank you.

1. I simply opened Form 4562, read the IRS Instructions, and started filling it out.

2. I will go back and use the program that walks you through the preparation and see if that helps.

3. I completed a 1031 exchange - I am depreciating the new property for the first time - so calculating my depreciation is complicated. The historical deprecistion of the exchanged property is relevant. I don’t know if your program will help but I’ll try it.

4. The Form 4562 Instructions say to file it the year you put the depreciable property into service. Not every subsequent year you depreciate the property. I think it calls for me to put down 50% of the annual depreciation if in the first year the property is in service/depreciable for 6 months. My fear is the next year when I depreciate the property for the full year the IRS will flag it because it is twice what I put down the prior year for 6 months. But I could file another Form 4562 that year.

Thank you.