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Ask Robin D. Your Own Question

Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7262
Experience:  15years with H & R Block. Divisional leader, Instructor
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My rental property was never depreciated for tax purposes.

Customer Question

My rental property was never depreciated for tax purposes. I have been renting it for 15 years now. Using Turbo Tax software, how can I start depreciating it for tax purposes? What can I claim as repair cost for this property and what is consider improvement. Can I depreciate appliance such as new stove, fridges, furnace, etc.
Submitted: 2 years ago.
Category: Tax
Expert:  Robin D. replied 2 years ago.

Robin D :

Hello and thank you for using Just Answer
In answer to your question about the appliances, yes, you may depreciate their costs. Your cost basis in the property is generally the amount that you paid.

After determining the cost or other tax basis for the rental property as a whole, you must allocate the basis amount among the various types of property you're renting. The types of property, means things such as the land, the building itself, any furniture or appliances you provide with the rental, etc.
When you input your asset as “residential rental property” TurboTax automatically assigns the correct recovery period for depreciation. Recovery period is the assets useful life.
TurboTax figures out your depreciation for you based on your entries on the “Tell Us About This Asset/Large Purchase” screen where you are asked cost information.
TurboTax figures depreciation on your rental property in accordance with the IRS guidelines.

Robin D :

I hope this information is helpful but please let me know if you need clarification before you click ACCEPT

Robin D :

FYI= If you did not claim depreciation in past years you can go back 3 years and amend your returns to add the depreciation.

Customer :

Instead of going back three years and doing amendments, can I begin depreciating this year?

Robin D :

You can begin, but you may not add any past year costs on this year's return

Robin D :

In other words if you baught the appliance last year then you can not start the date for depreciation as 2011. You would need to list the correct date of starting to use it for depreciation

Robin D :

bought *sorry

Robin D :

When I say last year, I mean 2010

Customer :

I am referring to the rental property itself... the building

Robin D :

Yes, but that means the same thing. If you purchased (or placed into rental in 2000) then the date you placed in into actual service is your start date

Robin D :

this means that you remaining time to depreciate is less as you have lost those past year

Robin D :

you* sorry your remaining

Robin D :

When TurbTax asks for dates you must be exact

Robin D :

You can not start the date in 2011 if you really started 15 years ago. That would allow you to run too far into the future with the depreciation

Customer :

so if I placed the property into rental in 1994 and did not depreciate how can I account for those years

Robin D :

You cannot now. You can only go back 3 years to amend.

Robin D :

What was the reason you did not use depreciation in the past

Customer :

someone else did the tax

Customer :

what do you suggest?

Robin D :

Oh

Robin D :

I would amend the returns then continue to depreciate

Customer :

what start date would you put on the returns

Robin D :

For the building you need to put the date you first starting using it for rental (month, day, 1994) for the other items when purchased

Robin D :

TurboTax will apply depreciation based on the current percentage you are allowed.

Customer :

what happens if I start depreciation as of this year?

Robin D :

If you have been showint the rental (I hope) on your past returns then a simple audit would show you are not using the correct percentage for the depreciation

Robin D :

This is all importnat when and if you sale the rental property

Robin D :

I know it does not seem fair but if you do not claim depreciation , you are still required to reduce the basis of the property for the allowable depreciation of the property when reporting the sale. This generally increases gain and thus tax.

Robin D :

DId you have another question about depreciation

Robin D :

If you think of something else you can always come back even after you click ACCEPT

Customer :

sorry, got busy. yes the rental was being declared on the previous years tax returns.

Robin D :

Thne if you start a date NOW for depreciation of that same property it is an easy catch for any auditor. Every year has a specific percentage amount and yours wold not add up

Robin D :

A 2011 start date on a real property that has been used in rental on previous years is an easy audit item

Robin D :

Every year has a specific percentage amount an dthe first year of depreciation is not the same a s year 15 years later. This is why I said to make sure that TurboTax gets the correct beginning date so the percentage and depreciation schedule is correct

Customer :

do you have to depreciate a rental property

Robin D :

You do not have to depreciate it but as I mentioned above, when the proeprty is sold you must recapture depreciation that was claimed or could have been claimed. So if one does not use their depreciation then they are not using all they could plus on the sale end of it they are required to account for a lower basis and higher gain.

Robin D :

It does no good to not use yor depreciation

Robin D :

your

Customer :

if I put a 1994 start date would Turbo Tax do the depreciation for all the preceding years?

Robin D :

Yes, their system should show a depreciation schedule that takes into account the depreciaton that should have been used up to year 2010

Robin D :

Then it shows the correct amount to slaim for 2011

Robin D :

claim

Robin D :

Boy if I do not get a little better or a little slower* sorry for those typos

Customer :

:)

Customer :

how many years would a single family dwelling be depreciated over?

Robin D :

29 1/2

Customer :

would TT automatically input this number?

Customer :

or do I have to manually input it

Robin D :

Yes, it will ask you questions and apply the tax law to the specifics.

Robin D :

It should do it all for you

Robin D :

The appliances should be 5 year class life

Customer :

cool. I will give u a break now. Don't worry I will accept your answer. Need to figure out if I have any more questions...

Robin D :

Come back any time

Robin D :

I said 29 1/5 but that is 27 1/2 years for that rental single dwelling.

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