We are renting out a home in a foreign country - which depreciation system (ADS or GDS) applies?

[akl2]

My husband owns a residential home in a foreign country, which he used  as his main home until May of this year when it was converted to a rental. Currently, Turbo Tax has this asset classified as MACRS convention: MM and Depreciation Method: ALT , and will depreciate over the next 40 years. How do we know that this would be correct vs. GDS method?

[TaxGuyBill · Accepted solution]

ADS is required for property outside of the United States.

However, if the property was "placed in service" in 2018, TurboTax is incorrectly using 40 years.  For Residential Rental Property that is "placed in service" in 2018 or later, ADS should be 30 years.

We reported the error to the developers almost a month ago, but if it is still showing 40 years for you, apparently they still have not fixed it.  You will need to either wait until they fix it (if they ever fix it, which could be possible) or use another method to file your tax return.

[akl2]

That is disappointing! Hopefully someone from TurboTax will chime in with a status of this defect.

[pstoehr]

I have contacted Turbotax and left forum messages several times as well.  They were alerted of the problem back in March. Still no solution as of today.  I guess at some point, I'll have to go to a tax professional instead of using TurboTax.

[Carl]

If you place the foreign residental rental property in service in 2018 or after, then the facts as they stand right now, are that you flat out can not use TurboTax. Foreign rental property place in service in 2018 or after has to be depreciated over 30 (thirty) years. Myself and numerous others notified TurboTax of this problem back in march of 2019 and so far have been ignored. So until this issue is fixed, anyone with foreign residential rental property just flat out can not use TurboTax to report it. The 30 year ADS schedule in the program is not available even if you select to enter things manually as "other asset type".

[tagteam]

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@pstoehr wrote:

I guess at some point, I'll have to go to a tax professional instead of using TurboTax.

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There is a workaround for this scenario but you must be using a desktop (CD/Download) version of TurboTax and must do an override on the Asset Entry Worksheet in Forms Mode (see screenshot).

The good news is the override does not appear to impede the ability to e-file the return.