I've had a few minutes to thing about this and just realized something that may be benificial.
- You're reporting 33% of your home is rental use. That would be 33% of the value as set "before" you did the build-out/renovations to the rental portion.
- Then enter your renovation costs as a physically separate asset. That physically separate asset is then 100% rental use and is depreciated based on 100% of it's cost. For this asset your COST would be what you paid for it, and your COST OF LAND would be zero since you didn't actually "improve" the land to increase it's value. That means 100% of your renovation costs are rental and that's what gets depreciated over 27.5 years.
Keep track of this stuff because you will need it in the future when you sell or otherwise dispose of the property.
