Did Turbo Tax Make an Error on my depreciation?

Forum|Forum|4 years ago
March 20, 2022
1 reply
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Hello,

I'm trying to figure out how my depreciation expense is calculated. My rental property's cost basis was calculated at about 127000. This means depreciation should come out to a little over 4600 right? The twist here is that in 2021 we had 143 fair rental days and 222 days where it was our primary residence...So I understand that the depreciation will be prorated. It should land around 1800.

However, on our return is only gave us about 600 in depreciation expense? How was this number obtained? I think Turbo Tax made an error however they won't let any expert review my form unless I upgrade to Turbo Tax live, which is ridiculous.

Is there some rule I don't know about? I know the formula is Cost basis / 27.5 (x0.39 for proration in my case) but that formula does not reconcile with what turbo tax put on my schedule E.

SweetieJean

Employee

Does the $127,000 include the value of the land?

You can review your forms by prepaying the TT fees with a debit or credit card.

garretttwrightAuthor

No. 127 is the cost basis of the property minus the site value

Carl11_2

Employee

Several things you could be doing wrong.

The amount you enter in the COST box is the total amount you paid for the property including the land. Generally, this is on line 101 of the HUD-1 statement you received at the closing when you originally purchased the property.

The amount in the COST OF LAND box is the value of the land. The program (not you) will do the math to subtract the cost of land from the cost, to determine the value of the structure.

Additionally, your personal use days most likely, is ZERO.

Rental Property Dates & Numbers That Matter.

Date of Conversion - If this was your primary residence or 2^nd home before, then this date is the day AFTER you moved out, or the date you decided to lease the property – whichever is later.
In Service Date - This is the date a renter "could" have moved in. Usually, this date is the day you put the FOR RENT sign in the front yard.
Number of days Rented - the day count for this starts from the first day a renter was contracted to move in, and/or "could" have moved in. That would be your "in service" date or after if you were asked for that. Vacant periods between renters do not count for actual days rented. Please see IRS Publication927 page 17 at https://www.irs.gov/pub/irs-pdf/p527.pdf#en_US_2020_publink1000219175 Read the “Example” in the third column.
Days of Personal Use - This number will be a big fat ZERO. Read the screen. It's asking for the number of days you lived in the property AFTER you converted it to a rental. I seriously doubt (though it is possible) that you lived in the house (or space, if renting a part of your home) as your primary residence, 2nd home, or any other personal use reasons after you converted it to a rental.
Business Use Percentage. 100%. I'll put that in words so there's no doubt I didn't make a typo here. One Hundred Percent. After you converted this property or space to rental use, it was one hundred percent business use. What you used it for prior to the date of conversion doesn't count.