You depreciate residential rental real property over 27.5 years on a straight-line basis (evenly over the 27.5 years.) So, if the house cost $100,000 and the land $10,000 when you put it into rental service, you would depreciate $90,000 over 27.5 years, or $3,272 worth of depreciation each whole year it was rented. Since you are renting half the duplex you live in, you would divide the total cost by 50% to arrive at the depreciable base.
Since you said you never deducted depreciation on the rental unit, you can deduct the lost depreciation as follows:
You have two choices in determining how you can claim depreciation that you failed to report in previous years. You can file an amended return for the effected years if allowed (you can only go back three years for this) or you can file IRS Form 3115 that will allow you to apply for a change in accounting method. If you file form 3115, you can report the missed depreciation in the current tax year.
If you decide to file Form 3115, be mindful that you can’t use this method for making a late section 179 expensing election, or to change the date an asset was placed into service, or to change the designated use of an asset.
On form 3115, you need to complete the entries on page 8 "Schedule E - Change in Depreciation or Amortization". In part I(a), the DNC code is "7", used to note a change in depreciation method from an impermissible method. You will need to complete the "Information for All Requests" on pages 1 to 3.
You can only prepare Form 3115 in the desktop version of TurboTax. You can find the form by entering the form number in the "Open Forms" box you will find in the Forms Menu. Here is a link to an article that you may find helpful: Reclaim depreciation missed in previous years .
If you sell the rental property, you must add back the depreciation allowable to the cost basis which will increase your gain on sale. You must do this even if you never deducted the depreciation .
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