Determining in-service date for depreciation calculation

Forum|Forum|3 years ago
January 8, 2023
1 reply
0 views

My tenant's rental contract started on 12/21/2021. Because it was rented out for less than 15 days in 2021, I didn't report any rental income or expenses for 2021. I am counting 1/1/22 as the in-service date for depreciation calculation. And I should deduct the whole year (3.636%) of depreciation, NOT the 3.49% depreciation usually listed for starting sometime in January. Am I doing this correctly? Thanks

Best answer by Anonymous_

@5141589 wrote:

Am I doing this correctly?

That does not appear to be the case.

Since you converted the property exclusively to rental use in 2021, you should most likely have reported the income and expenses during the rental period for that year as well as reported the depreciation deduction for the appropriate period (i.e., depreciation would have begun on 12/15/2021 since the mid-month convention is used). Section 280A(g) usually applies to property used as a residence before and after rental periods and not merely after the property is converted to rental use.

If you want to indicate that the property was converted to rental use on 1/1/222, then the program is going to use the mid-month convention and depreciation will show the property as being placed in service on 1/15/22.

Anonymous_Answer

Level 15

@5141589 wrote:

Am I doing this correctly?

That does not appear to be the case.

Anonymous

Thank you!

So if the rental was converted on 11/22/21 and listed on 11/24/21, and lease agreement started on 12/21/21, is the "days rented out" 38 days or 11 days? Depreciation schedule would start on 11/24/21? And I can deduct any expenses that I paid on and after 11/24/21?

Anonymous_

Level 15

You can deduct typical rental expenses beginning on the date the property was available for rental use.

If you made it available on 11/22/2021, then you can use that date, which is not necessarily the date it was listed (i.e., if you would have accepted a tenant (renter) on that date, you can deduct rental expenses).