Person A:Go to the assets and depreciation section of your return. Be sure to note what the numbers are along with all past depreciation. You can change your basis in the house to the new amount. When you do, all of the past depreciation numbers will change in the program. This is why you need to keep all of your sch E and supporting documents in one place.
I want to urge you to create a financial notebook that is kept separate from your tax return. Keep it safe and each year, add your year-end statements from all your financial accounts plus a copy of your W2’s, your schedule E carryover information, and proof of your basis in your various investments. You must keep tax records related to a rental house from the time you purchase until you sell plus 3 years. It is very easy to lose track of disallowed losses, changes in depreciation, etc.
Person A is now set with the change in value of the house for 2020 to match reality.
Person B will now depreciate the rental on their return for their investment amount for 27.5 years as it is a new rental to them.
@SFAllMyLife
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