All Forum Posts by: Callie Miller

Thank you guys for your input!

I have a condo unit that was converted from primary residence to rental property in January 2018. I calculated the cost basis for depreciation when I filled my 2018 tax return and thought everything was good. But now that I'm working on my 2019 tax return and revisiting the cost basis I did for 2018, I feel like it was done incorrectly. Please help me by taking a look at what I think the cost basis should be.

Unit was bought in July 2016, but was not converted to rental until 2018. So from what I read, I should be using either the fair market value at time of conversion or the cost of purchase plus addition/improvements, whichever is lower. I went to Redfin, Zillow and Realtor.com, and averaged the FMV out to be $322,000 for Jan 2018. I purchased the unit in 2016 for $309,000, and immediately updated the floor (changed from carpet to hardwood) and smoothed out the ceiling (had popcorn ceiling) which together costed $6000, so total $315,000. Since this is lower than FMV, I will use $315,000 as the cost of the property.

According to county tax assessment, the land value is $25,500. I then subtract this from the cost, so $315,000 - $25,500 = $289,500, which is my cost basis of the property. I converted the condo to rental property in January of 2018. So for 2018, the depreciation (using linear, 27.5 year use) is $289,500 * 3.485% = $10,089. Then every year after this, the depreciation would be $289,500 * 3.636% = $10,526 assuming it is a rental property for the entire year.

Does my calculation seems correct? Thanks in advance for all your help!