how do i switch the online software to single line depreciation method

[d_flewelling]

I forgot to depreciate my property so I had to amend my return last year using the desktop software and mail in hard copies. I now know my yearly depreciation amount, but I'm wondering how to claim it in the online software. thanks

[DianeW777 · Accepted solution]

It depends. If you haven't added your property to your rental activity that is the first step. Add your property as an asset on your rental activity. Be sure to use the information from your amended return for last year.

The steps for entering the asset property will display and carry the amount to your Schedule E.

1. Select Rental Properties and Royalties > Update/Edit > Select 'None of the above' for Real Estate Pro
2. Select Edit/Pencil beside Property one > Select Update/Revisit/Add another asset beside Assets > Continue > Continue
3. Enter the Name, Date Purchased/Acquired, Date Placed in Service, Cost > Select asset category Rental Real Estate Property
4. Description is Residential Real Estate > Land value (can be found by using your tax assessment) > Continue to finish
5. Select Done with Rental Property > Continue until you reach Rental and Royalty Summary

Please update if you have more questions or need additional assistance.

[d_flewelling]

thank you!  I was able to do this.  However, I now have another question.  Because I had to manually request to change accounting method for depreciation using desktop software in year 2025 (for 2024), the online version of Schedule E for 2024 does not list my depreciation amount, which means my totals in line 21are incorrect and my losses in 26 are greater than what is currently on the form.  Does this matter?  Is there something else I need to do?  Turbotax keeps asking me about "at risk rental losses" and regular and QBI tax carryovers.  I have no idea...thanks

[ThomasM125]

You do not have to do anything about the 2024 return. The depreciation adjustment will appear on your 2025 return as a miscellaneous expense item. 

A passive and QBI loss carryover would only occur if you had losses that could not be deducted in prior years. Generally, you are allowed to deduct up to $25,000 of rental losses against ordinary income, unless your income was over $150,000. If you had such loss carryovers, TurboTax would enter those automatically on the next year's tax return.

"At Risk" means that you are not deducting losses equal to more than your net investment in the property. For instance, if you purchased a rental house for $300,000 and had a loss of $50,000, you would have $250,000 at risk in the property.

[d_flewelling]

thank you.  I checked and the depreciation for 2024 is not appearing under 2025 as a miscellaneous expense.  Should I manually enter it?

[ThomasM125]

Yes, enter the adjustment in the Other Expense section on your Schedule E, page 1. 

[d_flewelling]

hello, I've added the depreciation for 2025 under depreciation.  do I need to add the prior year amounts under "other" on schedule E?  I played with the 2024 schedule E and added the missed depreciation in there to get the unallowed carryover numbers for 2025.  Where do I get my QBI carryover amounts?  What about prior year losses in the property?  This is such a confusing process.

[RobertB4444]

You would add the prior year amounts under "other".  

You only qualify for the QBI deduction if you are a real estate professional.  And in that case the QBI deduction is for the current year amount, it doesn't carry over.

Prior year passive losses will be entered when you are entering the property into the system and entering prior year depreciation.  The system will ask you about prior year losses while you are entering the property and declaring prior year depreciation.

@d_flewelling 

[d_flewelling]

thank you, I thought you could get QBI if you paid a real estate professional/property manager to manage the property for at least 250 hours. 

[d_flewelling]

so just so I'm clear.  on the 2025 return I would list the 2025 depreciation amount under line 18 "depreciation expense".  Then in line 19 under "other" I would enter what exactly?  just the amount for 2024 or the total missed depreciation that I claimed on form 3115 in 2024?  Right now my return only has the 2025 depreciation and not the missed depreciation amount.  although I believe the carryover amounts are correct as I got those by adding the missed depreciation to my 2024 schedule E.  

[d_flewelling]

and if I do have to add the missed depreciation to "other" do I have to keep doing this every year?  

[DianeW777]

List the depreciation expense for all prior years as 'other expenses' and the current year (2025) will carry automatically to the depreciation line. This action is required only for 2025, each future year will have the correct depreciation expense.

The real estate professional is the person managing the property, that would not make you a real estate professional in most cases due to the time requirements you must meet.

Generally, a rental property does not carry the time requirements to be considered as eligible for the qualified business income deduction (QBID).

• Can I get QBID for rental property income?

Generally, this means each rental real estate enterprise (a rental property or group of similar rental properties, including K-1 rental income) must satisfy these three requirements:

1. Each enterprise maintains its own books and records to track income and expenses.
2. An enterprise that has existed less than four years performs at least 250 hours of rental services per year. For an enterprise in existence for four years or more, this test needs to be met for any three of the five consecutive taxable years ending with the taxable year.
3. (Starting with tax year 2019) Contemporaneous records of services performed are kept which includes who performed the service, description of service, the date of the service, and how long it took (who, what, when, and how long).

@d_flewelling 

[d_flewelling]

ok I have amended my return and added years 2016-2024 in "other".  This has now increased my tax due to 280.  I don't understand why I keep owing more when my rental expenses are technically going up, by A LOT.  Last year when I filed the 3115, I paid an extra 65 USD in tax. 

For QBI, the online software says that I don't have to be a real estate professional to qualify, but that I can pay others, like property managers, to manage the property.  when I said i didn't qualify, it said that it would still check for safe harbor QBI.  Why is this so confusing.  

[d_flewelling]

But I don't think I qualify for the QBI safe harbor, because it's just one rental property and not multiple (to make it an enterprise).

[DaveF1006]

The reason you keep owing more is likely that the depreciation corrections from your 2016–2024 amendment are outweighing the current-year expenses.

Regarding QBI: You don't need the Safe Harbor to take the deduction. If you are operating the rental to make a profit and are involved in the decision-making (even if you hire a manager), most tax pros would argue it qualifies as a "Trade or Business," giving you that 20% break.