If you have been using Turbotax, I would follow their outline and just fill in their blanks because their set up is quite comprehensive. Turbotax calculations behind-the-scene appear very elaborate and if you you do not follow their steps, the end results may be messed up (e.g. counted twice, not all all, or in the wrong place).
It is correct that home improvement can be used to increase the cost basis but depreciation can be quite complicated (especially if there is partial rental). For example, depreciations taken earlier to decrease rental income is restituted at sale time into the cost basis, but taxed at income rate (not capital gain) etc... Also Turbotax grabs these depreciation numbers from prior tax files (if you used Turbotax in the past), so they may be automatically transferred. So beware.
