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Visitor II

Proper calculation for depreciated cost basis of rental property.

Why is Turbo tax giving me this small depreciation?

Purchase price: ~$670,000

Land value: ~$410,000

Depreciation Results says that ~$3,500 will be depreciated over the next 27 1/2 years.

This does not compute!

Can anyone offer a suggestion please?

Thank you.

2 Comments
TurboTax Specialist

Proper calculation for depreciated cost basis of rental property.

Land is never depreciable. It's never used up. Your depreciable basis is therefore $260k. From IRS link below.

 

"Depreciation is an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property. It is an annual allowance for the wear and tear, deterioration, or obsolescence of the property.

Most types of tangible property (except, land), such as buildings, machinery, vehicles, furniture, and equipment are depreciable. Likewise, certain intangible property, such as patents, copyrights, and computer software is depreciable."

 

 

Overview of Depreciation

Catalyst V

Proper calculation for depreciated cost basis of rental property.

"Depreciation Results says that ~$3,500 will be depreciated over the next 27 1/2 years."

Sounds to me like $3,500 is your first year depreciation based on a mid-month calculation. The amount being depreciated over 27.5 years is $260,000. That first year depreciation amount of $3,500 tells me that most likely, the property was placed in service in the last quarter of the 2017 tax year.