Section 754 and 743(b) depreciation is usually used to reduce the income reported on the K-1 from the partnership side. A section 754 depreciation adjustment reported on the supplemental information page of a K-1 doesn't usually need to be reported anywhere on the individual tax return.
You can make sure that the adjustment doesn't need to be entered, by reviewing the supplemental information to see if the depreciation adjustment is reducing the net income.
To manually enter the adjustment if it hasn't already been used to reduce K-1 income:
- From the Input Return tab, go to Income ⮕ Passthrough K-1's.
- Select the appropriate K-1 entity.
- Go to the Less Common Scenarios tab.
- Scroll to the Separately Stated Income and Deductions section.
- Enter the amount of the adjustment as a negative figure in the line Other (Click on button to expand) for passive items, or Other nonpassive income (Click on button to expand).
