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Calculating Depreciation?

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  • Calculating Depreciation?

    Looking for some help from the experts here.

    I own a rental condominium for which I paid $174,000 in 2006 ( $50,000 down and mortgage $124,000--> current prinicipal $100,000).  I recently began renting it out in 2015.  For the tax year of 2016 I would like to calculate depreciation.  My  understanding is taking the basis/27.5, do I deduct the amount directly from my profit in the rental property?  Trying to do this myself through H&R block without a tax accountant but maybe its a little too much.  Any help would be greatly appreciated.

  • #2
    Start by allocating a value to the land. It's kind of difficult for condo's, but you're still expected to b/c land is not depreciable.

    Basis is original purchase price less land + any improvements less prior depreciation (for 2015 only, in this case). Divide basis by 27.5 for 2016 depreciation.

    If you are a HIP (High Income Professional), any PAL (Passive Activity Loss) will be suspended and carried over until you either have income to net against your aggregate losses or sell the property.

    The mortgage has nothing to do with any of this.

    Activities/transactions for the condo in the intervening years (2006 - 2015) could imap the the basis of the condo.

    With sincere respect, you should really consider working with a CPA or EA who is experienced in this area.
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087