Where do I enter a residential real estate depreciation schedule of 27.5 years on Schedule C? The income from my rentals is treated as "active" not "passive"

Forum|Forum|3 years ago
February 2, 2023
3 replies
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I only see the commercial real estate as an option.. however, this is residential real estate, NOT Commercial.. I shouldn't be forced to claim depreciation on Schedule E, simply because TurboTax's software doesn't have another option on schedule C for 27.5 year depreciation.

TurboTax Self Employed Online

Anonymous_

Employee

Residential rental real estate is reported on Schedule C if you are a real estate dealer or provide "substantial services" to your renters. Otherwise, residential real estate is reported on Schedule E, whether passive or nonpassive ("active" is a lay term and doesn't exist otherwise, except for "active participation").

On Schedule C, you will find only nonresidential real estate in the Asset/Depreciation section of TurboTax.

Carl11_2

Employee

Typically, long term residential rental real estate is reported on SCH E. It would only be reported on SCH C if it met the requirements to qualify as an "active trade or business", which is not at all common for long term residential rental real estate. It's not impossible; but it's not common.

If it does qualify as an active trade or business (doubtful, but not impossible) and you report it on SCH C, then it gets depreciated over 39 years; not 27.5 years.

If this is the only rental property you own, I have doubts that it qualifies as your active trade or business.

dhuber24Author

I do meet the test for material participation, and I have two rental properties, both of which have average rental days of less than 7 days. What I'm reading is that the IRS considers rental properties with average rental days less than 30 days, are no longer considered "dwelling" units, rather they are now classified as "transient" unit and need to be depreciated over 39 years as commercial property. This just doesn't make sense to me.. its not a commercial property.. but am I SOL and this is just the way it is?

Anonymous_

Employee

I will page @AmeliesUncle as I believe he can explain this better than I.

Basically, however, the "rule" is for the purposes of Section 469 only and, in fact, a temporary regulation on this expired a long time ago.

GeorgeM777

If you began entering your rental property information as Self-Employment Income in TurboTax, you will not see an option to describe your asset as Residential Real Estate. You will see, as you did, the property asset as Non-Residential Real Estate with a depreciation of 39 years.

Enter your residential rental property in Rentals, Royalties, and Farm section which is under Wages & Income. After you enter the basic information about your rental property, you will see the option to select Residential Rental Property, and in the Asset Summary screen, you will see the depreciation timetable as 27-1/2 years.

@dhuber24

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