Depreciation on REntal property in US does not seem correct

Forum|Forum|1 year ago
March 5, 2025
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I have been using Turboa Tax Premier for the last 7 years, up to 2023 tax year. I switched to a Tax preparer for 2024, but entered my data into TurboTax in 2024 just to see how they compare. I see that TurboTAx appears to be doing a incorrect calculation on the Rental Depreciation of my home in California, and it is different than what my tax accountant used.

Asset Worksheet in TT 2024:

Date Placed in Service: 1/1/2017

Type of Asset: I - Residential rental

Cost of Asset: $243,000

Amount of land in cost: $72,900

Depreciable basis: $170,100

Recovery Period: 27.5

Perc Bus use: 100%

Dep Type: MACRS

Asset Class: R

Dep Method: SL

Amt Dep deduction: $6,537. ???

If I divide 170,100 / 27.5 it is $6,185 (Which is what my Tax accountant had)

All the other questions on the worksheet are No/N/A.

I see other incorrect calculations o[n otehr Assets I had for 27.5 years.

M-MTax

Hi,

You have to ensure that the program has the correct amount of PRIOR DEPRECIATION or else your figures will be off.

For example, I get $6,185 with your placed-in-service date and your basis on my test file. Note that I have $43,040 for prior depreciation after I input the placed-in-service date of 1/1/2017 and the basis of $170,100. If you're getting a different result, the prior depreciation is the first thing to check.

pcoatsfamilyAuthor

Thanks! Prior depreciation on the home being used by TT is $35,825 (It is an airbnb rental and it was not always rented out for the whole year). How does the calculation work taking into account the prior depreciation? If I reduce the basis by the $35,825, my remaining (adjusted?) basis is $134,275. I have tried dividing that by several different amounts, nothing gives me the amount Turbo Tax is using : $6,537:

20.5: (27.5-6) (6: prior years in service): $6,550

21.5: $6,245.35

20: (27.5-7.5) (first year is .5?): $6,713

Note: Turbotax has the year of depreciation as 8

My tax accountant just used the Total basis/27.5, was she incorrect? Is there an IRS document/section that defines how the prior depreciation is used and how it impacts current depreciation?

M-MTax

@pcoatsfamily wrote:
Prior depreciation on the home being used by TT is $35,825 (It is an airbnb rental and it was not always rented out for the whole year). How does the calculation work taking into account the prior depreciation?

Sorry, but the TurboTax calculation is simply not going to work if prior depreciation was not consistent. The program just can't handle that scenario (there are others it can't handle either). You can enter the correct figure in forms view, I believe.

If the program returns a prior depreciation figure of $43,040, then the program calculation for the current year will be correct. If not, it will be off. That's just the way the program seems to work.

Re your tax accountant, there's no way I can determine whether or not she made an error based only on the facts you provided. I can say that if there was no personal use of the home and it was available for rental use all year, every year, then the depreciation deduction should have been higher, and the accumulated depreciation should have been $43,040 (or very close).