How to calculate depreciation on owner-occupied rental property?

Member since 2019 · 38 posts · 7 votes

For the home value, does one use the tax assessment home value or a recent bank appraisal?

This is for a 2 family home, the owner lives in one unit and a tenant in the other.

I heard that either can be used, but i’m not 100% certain.

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Victor N.
Investor · Wellington, KS · Member since 2016 · 256 posts · 188 votes
7y
Neither is correct. The depreciation calculation starts with the owner's tax basis in the property. If the property was purchased, the basis will be the purchase price including costs to purchase plus improvements. If the property was converted from personal use, the depreciable basis is the lesser of the basis or the fair market value of the property. Then you reduce the basis by the land value. You can't depreciate the unit the owner occupies.
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Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
7y
@Lingo Lin

Purchase price is used to determine total tax basis for land and building.

Assessor valuation can determine basis between land and building.

Since the unit is also owner occupied you further have to split it between personal/business.
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