Question

Nancy Woodruff converted her principal residence to a rental property in February, 2013. She paid $187,000 for it in 2007 and made improvements of $19,000 in 2010. Because of the real estate slump, an appraisal Nancy got to explore a refinance indicates that the market value of the property at the beginning of 2014 is only 169,500. Determine which depreciation method should be used and how much depreciation can Nancy deduct against the rental income from the former residence in 2019?

Answer 1

Currently, a personal residence converted to rental property would be depreciated over a 27.5 year life if the property is residential. Nonresidential property would be depreciated over a 39.0 year life.

When a personal residence is converted to rental property, you need to know the basis for depreciation purposes. This is the lower of your adjusted basis in the residence at the date of conversion (purchase price plus qualified capital improvements), or the fair market value of the property at the time of conversion

Cost of Property = $187,000+$19,000=206,000

Eligible Amount of Deprecitaion for year 2019=$206,000/27.5=$7,491.

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