Depreciation Calculations for Condo (Rental and Personal)

[joeh31]

A two bedroom condo owned by the parents is being used by an adult child and also being rented out (at fair rental value).  I see different responses as to how to calculate the percentage attributed to the personal vs. business (rental) for depreciation and expenses.  The condo's total square footage is 1300.  Bedroom #1 is for the exclusive use of the child (200 sq.ft.) and Bedroom #2 is for the exclusive use of the renter (150 sq.ft).  The remaining area of the condo (950 sq.ft) is used by both equally (living room/dining room, shared bathroom, kitchen, hallways, and garage).  In some posts I've read that the percentage for depreciation would only be based on the exclusive use of the renter (150/1300= 11.5%).  Others have indicated that I can include the areas used by both at 50% (so 950/2= 475 sq.ft.), so the Renter's portion (which would be the percentage used for depreciation) would be (150+475)/1300 = 48.1% of the basis.  For expense purposes, they probably both use the same amount of gas, water, etc., so expenses could be at 50%.  I'm not really concerned with figuring out the expenses, but which depreciation method can I use (let's assume that I don't want to do the calculation by the number of rooms).

[AmyC]

 Publication 527 (2024), Residential Rental Property states: You can begin to depreciate rental property when it is ready and available for rent.

The property you had available to rent exclusively, is the bedroom.   So, your depreciation is based on the space available to rent -usually a bedroom, maybe a bathroom - a private area. You would not rent out the living room. Depreciation can be a two edged sword. If you plan on selling this place in a few years, less is better in my opinion since it is reducing your basis.

While expenses aren't so important to you, costs can vary by room size or can be a fixed amount, like trash removal. One of the IRS seminars I attended, a statement was made about choosing a reasonable method based on all the variables and maintaining that method throughout. Whatever you feel makes sense based on all of your variables that you would be comfortable sitting down to explain, is a good method for you. Make a record of how you determined 50% of the trash and 30% of something else and so on until you get a good total % number that will continue to make sense for expenses.

[joeh31]

I agree that less depreciation is better (if going to sell in the short term).  I just want to confirm that the only way to allocate the depreciation for the tenant is by what they can exclusively use.  So, any common areas would not be included in determining the allocation for the rental portion (it's confusing because you are renting the common areas inside the condo to the tenant as well, but the IRS only looks at exclusive use).  I just don't want to take the lesser percentage (exclusive use) and then have the IRS say you should have done it a different way (allocate a higher percentage for depreciation) and recapture (?) the higher depreciation amount.  Hope that makes sense.  Thanks.