Inherited rental property depreciation

Forum|Forum|2 years ago
September 11, 2023
1 reply
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Wife and husband own rental house (non-community property state). Husband passes and wife inherits his half interest. The inherited half gets a step-up in basis based on FMV. Does depreciation on the step-up amount begin on husband's date of death with a new 27.5 period or done another way?

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TaxGuyBill

Level 15

@Charlie6 wrote:

Does depreciation on the step-up amount begin on husband's date of death with a new 27.5 period

Yes. This is what I recommend:

Delete/replace the current assets and replace them with two equal half-asset, using the original placed in service date (one for the husband's half and one for the wife's half).
On the husband's half-assets, go to the disposition section and enter the date of death as the disposition date (leave the sale price blank).
Create a new half-asset for the step up. Use half of the FMV on the date of death, and use the date of death as the placed in service date.

So this year will show THREE assets (for each prior asset). The first is the wife's half that will be continuing. The second is the husband's half that is being marked as 'disposed'. And the third is the 'new' step up portion. Next year will only show two assets (the 'disposed' one will disappear).