Rental Home Depreciation is 40 years how to add improvements to its basis

[facmer]

When we started renting a home 8 years ago we chose 40 year depreciation.

This year we made improvements to that home (which has been a rental throughout).

     These are NOT items to deduct as maintenance or repair.

How to we indicate an increase in basis?

Do we just add a separate asset sheet and depreciate the improvement separately?

      If I add a new asset (the improvements) for depreciation can I choose 40 yr again (or must I use the 27.5 default)?

Or can I add to the original basis and continue the depreciation on the original sheet (for the remaining 32 years)?

As a numerical example:  Original Basis $200K (80K was land).

    Of the $120 Structure value we have depreciated $20K so far (so the remaining basis as of today is $180 with 32 years left remaining).

    This year I made $30K in improvements. Can I add it to my basis (increasing it to $210 - 80K still Land) and continue the depreciation? If so, where do I enter that increase (yes I have receipts for all the improvements).

Appreciate guidance

[GeorgeDenseff]

The basis never changes.  It is what you paid for the house when you purchased it.  Improvements are depreciated at 27-1/2 years.

[Critter-3]

Any new improvements are added as separate assets and depreciated as desired but you never mess with assets already being depreciated.  

[Hal_Al · Accepted solution]

Q. Do we just add a separate asset sheet and depreciate the improvement separately?

A.  Yes.

Q.  If I add a new asset (the improvements) for depreciation can I choose 40 yr again (or must I use the 27.5 default)?

A.  You have an option, but it's now 27.5 or 30 years.

If you're using ADS (alternative depreciation system), the recovery period for the same type of property is 30 years for property placed in service after Dec. 31, 2017, or 40 years if placed in service prior to that. 

Reference: https://www.investopedia.com/articles/investing/060815/how-rental-property-depreciation-works.asp

[Carl]

Do we just add a separate asset sheet and depreciate the improvement separately?

Yes. In TurboTax you will add the new asset(s) in the Assets/Depreciation section.

If I add a new asset (the improvements) for depreciation can I choose 40 yr again (or must I use the 27.5 default)?

For rental property and their assets that are physically located in the US, they get depreciated over 27.5 years. If the rental property is located outside of the U.S., they get depreciated over 30 years.

Or can I add to the original basis and continue the depreciation on the original sheet (for the remaining 32 years)?

Under no circumstances and with no exceptions will you ever change the cost basis of an already existing asset. It will completely screw up your depreciation and depreciation history. There are no exceptions. (Unless you made a mistake when initially setting up the asset. But there's a procedure for correcting the mistake with IRS Form 3115 that must be followed. You still do not just arbitrarily change the existing cost basis.)