if you use tax softgware, then w hen you enter your rental property info. into the system, The tax software will ask you questions regarding the rental property, to determine the depreciation method to apply, and calculate depreciation however basically, you need to enter the total amount paid for the capital improvement on Line 19e, Column c, of Form 4562. Capital improvements, also called leasehold improvements, have an IRS-designated class life of 15 years.
Youneed to ?15? in Line 19e, Column d to designate the recovery period for leasehold improvements assigned by the IRS.
Ealso you need to enter the applicable convention in Line 19e, Column e. The applicable convention depends on the type of property to which you made the capital improvement. an improvement to a residential rental property uses a mid-month convention. The convention determines how many days of depreciation you can claim in the tax year you incurred the expense.
Yo need to enter your elected depreciation method in Line 19e, Column f. The IRS designates several different depreciation methods depending on the type of improvement and the type of property to which you made the improvement. The elections can change each year, so you should review the options for the taxyear you incurred the expense and make the appropriate election for that year.
You should calculate the depreciation for the year using the recovery period, convention and selected method to determine the exact amount of expense. Enter the expense in Line 19e, Column g.
Complete the remainder of Form 4562 and carry the total depreciation expense for the year to the form used to report your business income and expense.