Hello, we have a rental for the first time...our old house. Do we include the $8000 housing tax credit from 2009/2010? That was part of the housing credit stimulus.

[Coleen3]

Yes. When converting a house from personal to rental property, you take depreciation on the lower of your adjusted basis or the Fair Market Value of the property. Since the property would have had to have been rehabilitated, increase the basis by that amount. Then, the credit would decrease that basis. It may or may not zero out.

8. What is the effect on basis when a structure is rehabilitated?

The basis of rehabilitated buildings, including certified historic structures, must be reduced by 100% of the rehabilitation credit earned regardless of whether the credit is used or carried forward. The reduction amount is added back if the credit is recaptured. See Treasury Regulation 1.48-12(e).

https://www.irs.gov/businesses/small-businesses-self-employed/tax-aspects-of-the-historic-preservati...