Rental property depreciation not calculating correctly

Forum|Forum|2 years ago
February 2, 2024
2 replies
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I can't figure out why the current year depreciation amount for my rental property will not calculate as i expect. Last year I had a tax service do my taxes, so I have the Depreciation Detail Listing worksheet from them. It has all the relevant info needed, including date in service, building cost basis (no land), business percentage, lifecycle, rate, prior depr, current depr, etc.

When I plug these values into TT, it calculates a value way higher than I believe it should be for the depr expense for the 2023 tax year.

Date in service 4/1/2004, Cost basis $43867, SL 27.5 yrs, accumulated depr=$16083. current year $1595.

I am expecting current year to be the $1595 (43867 basis / 27.5yrs = 1595), but it appears TT is using the accumulated depr amount to get the current year depreciation. If I raise the accumulated depr dollar amount in TT, it will adjust the current year depreciation amount. I can't find another way to get the calculation to come out correctly, any ideas? When I go back and look at prior year tax statements (from tax preparer service), the current year depr value is always the $1595 value. There were some years between 2004 and present where I lived in the unit and it was not depreciated as rental. Now it has been rental again for a few years.

Carl11_2

Employee

The below statement jumps out at me:

There were some years between 2004 and present where I lived in the unit and it was not depreciated as rental.
Are you saying you have some years where it was still classified as a rental with less than 100% business use for each of those years? Or are you saying there are years where you lived in it for personal use for the entire tax year, and did "NOT" report it on SCH E since it would not have been a rental for even one day in that tax year?
I ask, because when you have tax years with varying percentage of business use, or varying percentages of personal use, that will change the allowed depreciation for that tax year. That can "and will" throw things off. In my testing with the TTX program a few years ago (maybe 2 years ago) the program flat out was not able to handle it correctly.

crosent344Author

When the property was being used as personal, no depreciation expense was deducted. In years where the business and personal was split, they used an adjusted depreciation amount that reflected only the months it was rental property. In years where the property was rented 100% all year, the full $1595 depreciation expense was deducted. I want to do that again this year, use the full depreciation amount because it has been rented all year.

Carl11_2

Employee

As I see it, things appear to me that the program just flat out can not correctly handle your situation. Another thing to, is you "seem" to indicate that you did have at least one full tax year where the property was never rented, or even advertised for rent. If so, the correct thing would have been to convert the property back to personal use. When converted back to rental again, you'd start depreciation all over from year 1 using the adjusted cost basis of the structure only, to account for depreciation already taken in prior years when it was a rental.

cchat

I have the same issue and followed this promising answer without success. I cannot get the numbers to match what my preparer listed for "next year's" (2023) depreciation. I spent a couple of hours with live help, and they couldn't figure it out either. I may have to go back to my preparer if I can't get this to work.

crosent344Author

Same here-I tried using TT last year, and live help was no help at all, just canned answers that weren't a solution. Gave up and went to my tax preparer again. Tax guy laid out my depreciation schedule for 2023 but can't get TT to get the same numbers. Funny, I did a test entry on both efile.com and H&R Block apps and they both calculated it to the penny with minimal effort. I guess i will end up using one of those but compare the other values against TT for a cross check. That solution does look promising but so much work. I'm likely not spending any more time on TT trying to get it to work when it calculated so fast and accurate on both those other sites. Clearly TT needs to work on this part of the app.