Depreciable basis when converting residence to rental property

[David Mateer]

Hey everyone!

Let me preface this post with the fact that I plan to talk with a CPA on all of this, but I like to be educated for conversations like this.

I purchased my house in 2012 for $185,000. I’ve been living in it as my primary residence since then. I am considering converting it to a rental property as I am in the process of building a new house.

Per the county tax assessment, land is 12.03% of the value and the building is 87.97% of the value. That leaves me with the following values:

Building Value: $162,746
Land Value: $22,254

The average of Zillow, redfin, and realtor.com show my home value now is $244,000. I will use this for the time being but will get some agents to give me comps/price as well. Assuming the 87.97% building value would give me a FMV of ~$214,600.

Since I have lived in the house, I made the following improvements:

2013: Rebuild of Chimney ($3,900)
2015: New Garage doors ($3,300)
2015: New Front Door ($3,200)
2016: New Water Heater ($1,500)
2018: New Roof/Soffit/Fascia ($15,500)
2019: Furnace & A/C replaced ($6,800)
2020: Kitchen Remodel ($33,500)

That is approximately $67,700 in improvements to the house since the time I moved in. If I calculate the adjusted basis, that would be $230,446 (162,746 + 67,700). Per the IRS, you have to use the lesser of the FMV or the adjusted cost basis, so I am assuming that my depreciable cost basis would be the $214,600. Am I thinking about this right?

Additionally, I've added appliances to the house that will stay as well. My understanding with these is that I would need to determine a FMV for each at the time I put the house in service to depreciate them separately. I'm curious what the IRS would consider as a reasonable approach to estimating the FMV. Would finding the used model on ebay or craiglist be a starting point? Beyond that, I'm not sure how one would find a FMV for used appliances.