Investors & landlords

The following is the rule when you convert property from personal use to rental (income-producing) use:

 

Property changed from personal use.

If you held property for personal use and later use it in your business or income-producing activity, your depreciable basis is the lesser of the following.

  1. The fair market value (FMV) of the property on the date of the change in use.

  2. Your original cost or other basis adjusted as follows.

    1. Increased by the cost of any permanent improvements or additions and other costs that must be added to basis.

    2. Decreased by any deductions you claimed for casualty and theft losses and other items that reduced your basis.

     

     

     

    See https://www.irs.gov/publications/p946#en_US_2019_publink1000107373