My question is, how do I value the house for depreciation?
The response provided needs better clarification for you. So here goes.
I was living in a house that I bought 35 years ago for $135K
Were you single when you purchased it?
Do you live in a community property state? (This matters BIG TIME!)
Fifteen years ago I bought out my spouse’s share of the home for $89K
This is where it gets trickier now. If both you and your spouse were on the property deed when you originally purchased the house 35 years ago, then "YOUR" personal cost basis in "your" 50% of the ownership is half of $135K, or $67,500. Then add to that the $89,000 you paid what I presume is now your "ex" spouse for her 50% of ownership in the property. This scenario makes your cost-basis $156,500.
Now add to that 156,500 ONE HALF the cost of any property improvements done *before* you purchased your ex's half.
Then add to that the total cost of any property improvements that were done "AFTER" you had 100% ownership of the property.
This total is your final cost basis. This is what will be used by the program to figure the amount to be depreciated over the next 27.5 years starting on the date the property is "available for rent".
If you live in a community property state, then it doesn't matter if you were single or married when you purchased it. Upon saying "I DO", your ex instantly had ownership of 50% of the property. So the above will still apply to you weather you were single or married when you purchased it.
