Form 4562 special depreciation cannot be entered

[univ0298]

For a working interest Oil and Gas partnership (Schedule K1 Form 1065) I need to add depreciation for the Tangible Drilling Cost (TDC) that are eligible for bonus / special 1st year depreciation in 2025 (One Big Beautiful Bill Act).

I'm using TurboTax Premier Desktop

After I add my K1, the first issue is that I found no way to get the questionnaire to add a Form 4562 for depreciation. However in the forms view I could add this manually. 

The second blocking issue I have is that when I try to edit that Form 4562, some of the boxes won't allow me to enter anything. I can put the special depreciation in box 14 (Part II) but it's not flowing through to part IV so I have no total ultimately. 

Ultimately the form 4562 just isn't working properly with Schedule K-1

[PatriciaV · Accepted solution]

Tangible Drilling Costs are not typically reported as a line item on Schedule K-1. Instead, the partnership calculates the depreciation (usually via MACRS over 7 years) and includes that deduction in the Ordinary Business Income (Loss) reported in Schedule K-1 Box 1. You may wish to contact the company that prepared the company tax return to confirm the TDC depreciation was included in Box 1 and inquire what method was used for this depreciation.

If, however, TDC depreciation was NOT included in Box 1 and the K-1 does not report this expense, you would need to set up a Schedule C business in TurboTax to track the TDC as a business asset, which then could be depreciated using whatever method you choose. Form 4562 is linked to the Asset Worksheets of your business and cannot be manually completed.

For more help, see:

• Where do I enter Schedule C?
• How do I enter my business assets for depreciation?

[univ0298]

Thanks for the prompt and helpful reply. I have since discovered that because this is an individual direct working interest (no partnership) there will be no K-1 and instead everything needs to be done through Schedule C. Schedule C then allows for the Form 4562 to be correctly filled out to represent the TDC depreciation as well as the SDA for the IDC costs.