TurboTax for home & business calculates new rental depreciation incorrectly.

[hpd]

I have a new rental of an inherited property. I can split my DOD basis in the property between land and improvements based on the property tax statement. That gives me a preliminary depreciable basis for the property, as only improvements are depreciable. I then made subsequent improvements to the property. These have nothing to do with land, they are direct improvement costs. They should be added to the above improvement basis for the total depreciable basis prior to being put into service.

However, TurboTax takes the whole basis, adds the subsequent improvements to the whole basis, then applies the land improvement split, with the net result that it attributes some of the direct improvement costs to the land. That is just plain wrong. On the worksheet one can see how it's done incorrectly.

To work around this mistake, which one should not have to do, one can just enter the improvement value of the property (i.e. land/improvement split applied to the DOD assessment), the cost of subsequent improvements, and a land/improvement split of 0/1. But this is a serious mistake in the software.

[PatriciaV]

TurboTax calculates depreciation based on your entries. If you enter only the improvements that can be depreciated as the basis of the property and the subsequent improvements as separate assets, the program will calculate depreciation for each asset. 

Land value is never entered as a rental asset because it is not depreciated. The value of the land only comes into play when you sell the rental.