Once you begin renting the property (or when it is available to rent), you not only can depreciate the home, but you are supposed to depreciate the home. Since you are converting the residence to a rental, the depreciation basis will be the lower of the adjusted basis you have in the home or the Fair Market Value of the home (FMV). If you don't take depreciation on this amount, then, at the time you sell the rental home outright, you will still have to claim depreciation recapture on the depreciation claimed or allowable. Since that standard means you will have to account for the depreciation at the time of the home sale regardless of whether or not you actually claimed it, you should claim it.
With regards to your second question, no, you may not claim the HELOC interest as a deduction. With regards to your personal residence, you can only claim HELOC interest if it is secured by the property producing the Line of Credit and the HELOC is used on the home itself. In that limited case, the HELOC then becomes "acquisition debt" that allows for the amount to be deducted. Since what you are proposing is to use a HELOC from another property to make the down payment, this interest is not deductible. It also is not "business interest" either, because the funds are not being used for a business purpose.
If the situation were reverse (in other words, using a HELOC from a primary residence to fund a rental property), the interest might be deductible if there is a bona fide "business purpose" for the use of the funds. This would be the case, for example if the rental activity "rises to the level of a business" per Section 162. But, in your case, the situation would be the opposite. No deduction would be allowed in this situation for the interest payments on the HELOC.
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