You are asked to enter the Fair Market Value of the property on the date of conversion to rental. The lower of the FMV on that date or your adjusted basis in the property is used as the basis for depreciation.
The following information provided by tax expert RachelW tells you more about determining your property's FMV:
The "fair market value" is the amount a willing buyer would pay and a willing seller would accept when neither is compelled to buy or sell, in an "arm's length" transaction.
You can get an idea of the fair market value of your home by using a combination of these options:
- Using the assessed value on your annual property tax bill
- Using the value on your Homeowner's Insurance policy
- Getting an estimate from a realtor
- Check out Zillow.com as a comparison tool with the above options. It is not always the most accurate, but gives you a quick reference point.
Also, take a look at the following TurboTax article for more information:
Rental Real Estate and Taxes
@cashisking12
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