Basis for depreciating rental property

Forum|Forum|3 years ago
April 9, 2023
1 reply
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I have a two bedroom condo that I purchased in 2019. I began to rent out one of the rooms in 2020. Then in the fall of 2022, I moved out and rented out the room I was living in. Am I able to adjust the basis in order to increase the depreciation?

In the past, I depreciated the rental part of the home. Let's say the place initially cost $250,000, broken down as $150,000 for the home and $100,000 for the land. In TurboTax, I'd have $75,000 as the cost of the home (50% of $150K since half of it is used as the rental) and $50,000 for the land (50% of $100K).

Now that I've moved out and have rented out the whole place, could I adjust the $75,000 number up? For example, if I rented my room out in September, add the portion that wasn't depreciated?

So: $75,000 / 12 months * 4 months (September—December) + $75,000 = $100,000 and have that be the new cost of the home to base depreciation on.

And if so, would I use the original price or could I use the updated home value based on my tax bill (since property values have gone up in the last few years)?

Thanks!

TurboTax Premier Online

Mike9241

the only way to get correct depreciation since the two halves per put to rental at different dates and so you don't create issues in the future because of this, enter a second asset for the other $75,000 and in-service date is when you put on the market for rental. once you put it fully to rental the depreciable tax basis is 150K. the original part will de depreciated for a full -year while the other part the depreciation will be prorated. next year you'll get the full year's depreciation on the 150k.