Converted primary home to rental property after 20 years ..

Forum|Forum|2 years ago
April 12, 2024
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In calculating depreciation should I use the original purchase date of the home or the date I placed it in service as a rental?

KrisD15

Whichever is lower.

So that most probably is your original cost, but you can add any major improvements you made to that value.

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taxgurl23Author

Just a little better clarity purchased in 1996 rented it in 2016.... the depreciation was only taken from 2016 until I sold it in 2023... The major improvements you mentioned will have most occurred over the life of my owning the home -- so what I understand from your reply is that I should use the original purchase date 1996. Correct?

KrisD15

Yes, but it is the lesser of - the price you paid in 1996 or the Fair Market Value of when you put it into service in 2016.

I assume what you paid in 1996 was less than the Fair Market Value in 2016.

Why are you calculating depreciation now? Did you not take depreciation from 2016 until it was sold?

You say "The depreciation was only taken from 2016 until I sold it in 2023" which is correct.

The BASIS would be what you paid in 1996, but depreciation would have started in 2016.

Say you bought the home in 1996 for 100,000.

In 2016 it is worth 200,000 and you start renting it out.

In 2026, the depreciation is based on 100,000.

Residential rentals are depreciated over 27.5 years, so 3,636 per year.

You depreciated 2016 through 2023, so ABOUT 29,100 but it depends on the month it was put into service.

TurboTax should figure this out for you if you were using something else to file or would have these numbers if you had been using TurboTax since 2016.

You do not claim (or figure) depreciation from 1996 if it was not rented until 2016.

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