Help Understanding Depreciation and Improvements

[Sean Britt]

I am trying to understand how depreciation is calculated with respect to improvements. 

Please correct me if I am wrong, but my understanding is lets say I have a property I purchased at 200k. Lets say 50k is the value of the land and 150k is the property. My basis is 150k. I can take the depreciation of this over the next 27.5 years.

Lets say I have spent 10k on a new HVAC and fixtures in year 1. This would jump my basis up to 160k.

Do I depreciate based off 150k first and then add the 10k to the new basis? Or do I take my depreciation based off the 160k?

150k/27.5 = 5454.54 

150k - 5454.54 (write this off) = 144546.46 + 10,000 = 154546 new basis 

OR

160k/27.5 = 5818

160k - 5818 (write this off) = 154182 new basis

The numbers are close, but I wanted to know if I was even in the ballpark of being correct on how this is handled and then wanted to know if there is a certain order of how the basis must be categorized, such as improvements at the end or beginning of the year.

Thanks for your help BP.