Two Depreciation Questions - Did you purchase this asset new? and Special Depreciation Allowance

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dcschultz75
dcschultz75 Member Newcomer
edited May 13 in General

I am now entering my Depreciable Assets into FreeTaxUSA file for 2018. I transferred my 2017 Turbo Tax file into FreeTaxUSA. No problem, everything seemed to transfer fine except Depreciable Assets on my Rental Property (Schedule C). No assets came in from the TurboTax pdf file?? Not sure why, but no problem as I have the Depreciable Assets form from Turbo Tax on paper. I am entering those assets into FreeTaxUSA. When it asks me: Did you purchase this asset new? how do I answer that.. Yes or No.?? To me, if I bought a used mower from someone for the rentals, I would answer… no not new, its used to me… Or… do I answer YES for a used piece of equipment because it is NEW to me and my rental property?? Another example… if I put $5,000 into an improvement - remodel a room in the rental unit, with various used lumber, materials, etc. Do I answer Yes or No? YES, it is a new asset or No, because I used some old lumber to remodel?

Second question, how do I enter those assets that had a first year, Special Depreciation Allowance of a certain dollar amount in the first year, which is/was depreciated for a number of years already…? As always.. thanks for your excellent help!! Liking FreeTaxUSA!

Best Answer

  • CoryF
    CoryF FreeTaxUSA Agent
    Answer ✓
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    Thank you for joining our community, Dcschultz75.

    You need to answer Yes to these questions since the assets are New to you. For certain assets, the new designation allows you to pick from Special Depreciation types in the first year like Bonus Depreciation (applies only for the first year the property is placed in service) and Section 179 expense.

    For the Second Question, the subsequent pages in the Depreciable assets screens will ask if you applied the special depreciation allowance allowed in the first year of in-service (bonus depreciation) and ask for the amount used.

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  • dcschultz75
    dcschultz75 Member Newcomer
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    Thanks so much Cory! Much appreciated!…

    Just thought of another question. So even though I have been depreciating the rental house itself for years and it is actually depreciated out, when I set it up in FreeTax
    USA for the 2018 return, I would answer the question: Did you purchase this asset new?  I would answer it New = Yes?

  • CoryF
    CoryF FreeTaxUSA Agent
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    Thank you for this follow up question.

    When it comes to Real Estate like the Rental building this new/used question doesn't really change the circumstance. Since you have been depreciating the house for years, you would answer no, as you are adding the asset to the business (Schedule E). Even though the Schedule E business is new to your entry of the 2018 FreeTaxUSA software, it is not new to you. So, my answer is to click no in this case.

    The new/used question really applies to assets that have special depreciation capabilities. Residential Rental buildings don't have access to either Bonus or Section 179 depreciation having a useful life of 27.5 years.