Do I use the full FMV and taxable values to determine the depreciable value for a rental property being rented for the first time in 2021 that I co-own with my sister?

@baaadknight , 

1. It is not FMV or taxable value that you use --- it is your basis value less the value of the land under the property ( you can get that from the assessor's office ).  The basis  value is Cost of acquisition  plus cost of any improvements.  It may or may not eh FMV at the time of starting rent.

 2. On how to share the depreciation between owners , the most usual way is to   take all the earnings , expenses , depreciation etc associated with this rental and divide   by percentage ownership or any other agreed ratio  ( allocation )  and then each owner reports that on his/her return to the IRS.  Generally it is best to look upon the share  asset as a whole unit not multiple units ( to satisfy the multiple ownership )..  This also makes it easier  for IRS to see the logic followed in case of an audit ( very unlikely but possible ).

Is there more I can do for you?

The depreciation value is based on the "lower" of what you originally paid for the property plus the cost of any property improvements, or it's FMV on the date placed in service... whichever is lower. Typically, your original purchase price will be the lower now-a-days. The "taxable value" does not come into play at all for depreciation purposes.

Now the program will use taxable values for the purpose of determining what percentage of your cost basis gets allocated to the land. That's pretty much it. Tax valued as determined by your county property appraiser isn't reported anywhere on your tax return.

@baaadknight ,  as you will have noticed @Carl11_2  and I each assumed a different acquisition process.  Champ Carl assumed that this is a conversion from home to rental and his answer is absolutely correct.  My answer assumed that you two siblings have bought this property jointly and therefore answer  found no place for FMV.

However there is a third  acquisition path ( probably most germane to your situation) ---  this was acquired by you and your sibling through inheritance.  

If this is true  then your joint basis is the basis of the estate i.e. with a step up/down to  FMV at the time of passing of the decedent.   In such a case  (and assuming that  the FMV is still reasonably same  as at the above date, mentioned  )  then FMV is the basis of the property jointly shared.  Generally and absent some other arrangements, the share of each of the two siblings would be 50%. 

As I mentioned earlier taxable value is not a good figure  to use  for allocating value to the land that property sits on ---- this is because in some states like MI, taxable value is 50% of assessed / equalized  value.  That is I suggested contacting the local assessor's office to see the land value they assigned to the property  --- it is often 1/3 to 1/2 of the total valuation.

I hope now I have covered all the situations of acquisition ( except gift  from a living donor )

pk