How do I adjust RE improvement depreciation from the method TT is using? They are using 5 years and I am halfway through a 15 year schedule

Forum|Forum|3 years ago
January 27, 2023
1 reply
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It is zeroing out my depreciation on a furnace and AC installation. My tax preparer has previously used 15 years and I am only half way through.

TurboTax Self Employed Online

Carl11_2

Employee

It's really pointless to change this now. Typically, a new central air unit would be classified as residential rental real estate and depreciated over 27.5 years. But apparently, what you have was classified as an appliance, and therefore depreciated over 5 years. If it's fully depreciated now, you're best to leave well enough alone and move on. Besides, depreciation a new A/C unit which probably cost less than $6K is not going to have any appreciable impact on your tax liability if depreciated over 27.5 years. In fact, it probably won't make one penny of difference in your tax liability.

With the unit fully depreciated now, if you have to replace it in the future (typically 7-10 years) when you show disposal of the depreciated one, there will be no deduction for it, since it's fully depreciated now. But the new one would be correctly classified as rental real estate and depreciated over 27.5 years.

alaimoj733-gmailAuthor

@Carl11_2 Carl, thank you for your response. Let me clarify the situation. The furnace was put into service on 11/25/14 and 50% was depreciated in 2014 while the remainder was over 15 years. The Cost was $3,800 so $1,900 was applied in 2014 and the remaining $1,900 at $127 p/year. Therefore there are 8 years remaining. The same applies to the A/C unit put into service on 04/27/2017 though the numbers are different. There are 11 years remaining on the AC unit. So TurboTax asks if I took the 50% in the year the improvements were put into service and them applies a 5 year depreciation to the remaining expense thus indicating that the improvements are fully depreciated. The depreciation schedule was created by my accountant and I cannot ask why he used 15 years vs. TurboTax using 5 years. So my question is: Can the I override the TurboTax calculation so that I don't lose the remaining depreciation, which totals $3,528

DianeW777

Yes, you can make an adjustment for the correct depreciation. Be sure to keep your records with your tax returns until you fully dispose of the asset(s).

In your situation where you need to make an unusual adjustment to the depreciation schedule for an asset you can use the following steps. You may need to delete the assets you need to change.

Go to your business activity then scroll to Assets to select start or revisit
Add another asset and select 'Intangible, Other Property' > Continue > Select 'Other asset type'
Continue to follow the prompts, enter 15 year property and when you reach the Section 179 screen put in the 50% used in the first year
TurboTax will calculate the correct amount for the current year.
When asked about the prior depreciation, use the amount you have used through 2021. Do NOT duplicate the Section 179 amount a second time. TurboTax understands and will include it.
See the images below.