Incorrect Depreciation Calculations

Forum|Forum|3 years ago
March 8, 2023
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We bought and renovated a home in 2021. We are started airbnb-ing at the very beginning of 2022 and rent it 96% of the year. I am trying to depreciate the renovations. Land improvements depreciate over 15 years. Permanent fixtures to the house (tile and hardwood flooring, cabinets, etc.) depreciate over 27.5 years.

If I had $1,500 of land improvements, I should have at least $96 in depreciation (1/15 of the total improvement x 96%) in 2022. (And actually it should be more than $96 because the depreciation method that turbotax uses frontloads the depreciation so that it's more in the early years.) However, in this scenario, turbotax is calculating only about $50 of depreciation. I gone back over and over, re-entered, and it's doing the same thing with every land improvement that I have.

Also, on 27.5 depreciable year improvements to the home, instead of giving me 96% of the deduction (1/27.5 of the total improvement), it's giving me about 92%???

Any ideas? Thanks!

HelenC12

TurboTax is using the basis for depreciation of Land Improvements of $1,440 (not $1,500) based on the information I entered below.

According to IRS Publication 946, Table A-1, page 69, the depreciation amount is 5% for year 1 for 15-year property which is $72. I was able to recreate that depreciation in TurboTax.

I did not try and recreate your rental building since I did not have any information. Please refer to IRS Pub 946.

Using the Home & Business version of TurboTax:

1. On the Tell Us About This Rental Asset screen, I entered Land improvement,

$1,500 and 2/1/2021 as the Date purchased or acquired.

3. On the Tell Us More About This Rental Asset screen, I entered:

I purchased this asset
No, I have not always used this item 100% of the time for this business.
I first used this item at least part of the time for this business, and also used it for personal purposes.
Date I started (or it was available to rent) using it in this business: 01/01/2022
Percentage of time I used this item for this business in 2022: 96%