Depreciation and Amortization Report
Tax Year 2018
Date in service: 08/01/2013
Cost: 165,000
Land: 0
Business use %: 100%
Section 179: 0
Special depreciation allowance: 0
Depreciation basis: 165,000
Life: 27.5
Method/Convention: SL/MM
Prior depreciation: 24,465
Current depreciation: 6077
AlexCPA said in #2 is correct, the "extra" depreciation computed by Turbox Tax comes from the "lack" of the prior depreciation that the Turbo Tax tries to catch up. Here is the detailed computation to prove it:
The years from 08/01/2013 to 12/31/2017 using MM convention:
4.5 / 12 + 4 = 4.375
The prior year depreciation should be:
165000 / 27.5 * 4.375 = 26250
The lack of prior year depreciation is:
26250 - 24465 = 1785
Remaining years left:
27.5 - 4.375 = 23.125
The catch up amount per year:
1785 / 23.125 = 77 !
That is where the $77 comes from. Here is the answer that Turbo Tax provided to the question how to continue depreciation when there is rental activity suspension. This also shows the vacation home is not a factor per Turbo Tax as the not allowed vacation home depreciation will be carried over to the following years. Vacation home depreciation is allowed to up to the rental gain.
The extra "catch up" depreciation is a preference item for the purpose of AMT per Turbo Tax. I am not sure if every software can handle the "lack of prior year depreciation" by creating a catch up and treat it as a preference item, so I would like to do a survey:
- Can your software can do it?
- What would you do if a client with this depreciation history comes to you?
Thank you.