Tax implications of roomate for owner-occupied

[Patrick McGowen]

I friend of mine asked me if she should depreciate her home or not as she is bringing in a renter. Her CPA is going to run numbers for her, but I told her I would ask BP community if you had any good insight or innovative ideas. So here is the deal. She is in her 70s, many years ago she bought and lived in sfh #1 (cost basis around 200k), then rented it for many years, then she sold sfh #1 and did 1031 exchange into sfh #2, continued to rent with plans to eventually make it her occupied home. She has now been living is sfh #2 for over five years. This home has no mortgage (she is debt averse). The value of the home is probably 300k building 700 land ($1 mill total, she paid about half that for land and building). She is going to rent a room starting November for $4,000 a year. Since this is owner occupied, I am not exactly sure the rules of depreciation, she is living off traditional IRA so tax write offs help, and does she lose the 250k capital gains exclusion (she is single/widowed) if she rents. Assume in 10-30 years she sells home to move into assisted living. Any insight on best approach would be appreciated.