TurboTax including land in depreciable basis

Forum|Forum|3 years ago
March 26, 2023
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TurboTax is incorrectly including the land value in the depreciable basis of a rental property.

I've rented out part of my home and used TurboTax to calculate taxes on rental income since 2019. This year I checked the depreciation report more carefully, and it's clear that TurboTax has been calculating the depreciable basis not as ((home value - land value) * percentage rented), but as (home value * percentage rented) the entire time.

How can I fix this for the current and future years?

There doesn't seem to be any way to override TurboTax's incorrect calculation.

I've seen https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/incorrect-cost-basis-on-a-rental-property-for-10-years-didn-t-separate-out-the-cost-of-land-and/00/2839383, which suggests using form 3115 to fix the depreciation for prior years, since I can no longer amend the 2019 tax return, but if I use the incorrect accounting scheme this year that won't help.

PatriciaV

Employee

Yes, this issue began in the first year you reported the rental asset when you included the land cost in the asset basis. The post you mentioned has a discussion on Form 3115, which may or may not be applicable in your situation. The simplest viewpoint is that you are adjusting the depreciation on the rental asset and not changing the depreciation method that would Form 3115. However, you have reported excess depreciation in prior years, which reduced your taxable income. You would need to file amended returns for all affected years to report the correct rental income for those years.

The easiest way to fix your current return in TurboTax is to delete the asset entirely. Re-enter using only the basis for the rental property (without the land), with the original in-service date, and let TurboTax calculate what the accumulated depreciation should be.

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