@wleuter wrote:
@VolvoGirl
Thanks for your answer.
So even the home improvements happened a couple of years ago, I can still use it to increase the depreciation for my last year's tax deduction?
Basically, but it depends on the circumstances.
When you place the house in service as a rental, you must list the value for depreciation. You depreciate the property over 27.5 years. The larger the value you can list for depreciation, the more of a deduction you can take.
The value you use for depreciation is either:
a. your adjusted cost basis, or
b. the present fair market value, whichever is less,
c. minus the cost of the land (since land does not depreciate).
Adjusted cost basis is the original purchase price, plus the value of permanent improvements (but not repairs). Items that can be used to adjust the cost basis are listed in publication 523 on page 8.
https://www.irs.gov/forms-pubs/about-publication-523
For example, suppose the house cost $100,000, you remodeled the kitchen for $20,000, the portion of the original purchase price attributed to the land was $15,000, and the present market value is $150,000. The basis you list for depreciation is ($100,000 minus $15,000 plus $20,000)= $105,000.
