When you turn a property into a rental property (whether when you first purchase it or when you convert it) the value of the property is what you paid for it. Sometimes that's easy to figure out, sometimes it's not. What you paid for it is the original cost of the property plus any major improvements that you have made since it was purchased.
Once you've figured that total you're going to enter that amount into the box where TurboTax asks what you paid for the property. You'll also be asked about the 'Land Value'. That's the value of the land if the building got picked up and thrown away. I usually recommend 20% of the total value but some people prefer to use the percentage from the tax rolls and I've heard other people recommend 10 or 15%. Whatever it is you need to set a value for the land going into the depreciation.
Now, the system is going to take what you paid for the property minus the value of the land and deduct a part of it every year from your rental income. It will divide it into 27 and a half pieces (why a half? Good question.). Every year that depreciation deduction reduces your income. And every year the value of your property is decreased (on the books at least) by that piece.
When you sell the property you'll have to pay all of the taxes that that depreciation kept you from paying in the first place. But in the meantime it is a good way to reduce tour income.
@kbell3
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