Depreciable basis :
In general, the adjusted tax
basis of a principal residence is the cost of the property (i.e., what you paid
for the property when you first purchased it), plus amounts paid for capital
improvements, less any depreciation and casualty losses claimed for tax
purposes. Improvements add value to the home, prolong its life, or adapt it to
a new use. Regular repairs and maintenance are not included in the tax basis of
the home. When a principal residence is converted to rental property, you need
to know its basis for depreciation purposes. Its basis for depreciation
purposes is the lesser of:
- The adjusted basis of the
residence on the date of conversion, or
- The fair market value of the
property at the time of conversion
When
the property is converted the basis for
depreciation is the lower of the adjusted basis on the date of conversion or
the Fair Market Value (FMV) of the property at the time of conversion.
Generally the basis is the cost of the property
plus the amounts paid for capital improvements, less any depreciation
and casualty losses claimed for the tax purposes.
