Investors & landlords

you can own a home for 100 years and if in year 101 you start renting it that's when depreciation starts.  27.5 years for residential real estate property placed into service in 2019 (the land portion is not depreciable).  use the lower of cost or Fair Market Value on the date it was put to rental use.    over the years the life for rental property has varied greatly.  at one time there was no specified life in the code.  then ACRS  came in which specified the life for real estate.  then the ACRS life was lengthened. Now we have MACRS  which allows use of either the GDS or ADS life (see PUB 946). depreciation is allowed under code sections 168 and 179

I don't recall real estate ever having a 30 year life but maybe that was or is the case for foreign-based rental property.  39 years is the GDS standard now for commercial real estate. 

My parents bought a home we lived in for several years, and then we moved out, and my parents then continuously rented the home. depreciation starts when they started renting the home

The home was passed over to me several years ago, and it's continued to be rented. Is the depreciation the same, though it's changed hands? They didn't sell the home but passed it down to me. how was it passed to you?  if as a gift then your basis is determined as follows:

If you hold the gift as business property (rental property would be business property), your basis for figuring any depreciation deduction is the same as the donor’s adjusted basis (their cost reduced by the larger of the depreciation they took or should have taken under the tax laws in effect when they put it up for rental) plus or minus any required adjustments to basis while you hold the property. (see IRS PUB 551)

if you inherited the property the depreciable basis would be the date of death value reduced by the DOD value of the land 

I heard that depreciation can still be taken for a home if we've made capital improvements on it. Does that include renovations and repairs? Can you explain this some more?

any repairs would be an expense in the year paid.  capital improvements would be depreciated from the date they were put into service over 27.5 years. 

Also, is depreciation another way to reduce tax if we have a rental property? I've read various stuff online that seems like depreciations is optional and not necessarily a good thing for owners.

you must take depreciation using the proper life and method.  the tax laws state that when you sell the property (if you ever do) you must compute the gain or loss using the larger of the depreciation you have taken or should have taken. ignoring the land for a moment, if you were to rent the property for  28 years but not take any depreciation on the building which had a basis to you of $100,000, and you were to sell it for $100,000 you would have a $100,000 taxable gain.

to complicate matters if it was a gift there's a special way to compute gain and loss. it's in PUB 551

If the FMV of the property at the time of the gift
is less than the donor's adjusted basis, your basis depends on whether you have a gain or a
loss when you dispose of the property. Your basis for figuring gain is the same as the donor's
adjusted basis plus or minus any required adjustment to basis while you held the property.
Your basis for figuring loss is its FMV when you
received the gift plus or minus any required adjustment to basis while you held the property
If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the
FMV for figuring a loss and have a gain, you have neither gain nor loss on the sale or disposition of the property.