cost basis for depreciation of residential rental?

Question

we bought land and built a home in 2000 as primary residence. we had to relocate due to job as of July 2006 and placed the home in service as rental as of 7/1.
a) for depreciation against rental income, is our cost basis the actual cost of the house when built + improvements or is it the current fair market value cost of the house? Both the property land value and the home value have significantly increased since 2000.
b) is the depreciation taken on Schedule E

Answer 1

a.) The cost basis for depreciation purposes is your purchase price + any improvements minus the value of the land. You can depreciate the structures and improvements but not the value of the land.

b.) Yes, you take the depreciation expense on Schedule E along with the other expenses.

Answer 2

It is the actual cost, not the fair market value. Like the 1st Sargent said, don't include the value of the land cuz ,, well,, land doesn't depreciate.
The rental income goes on Schedule E, and the deprecation comes from form 4562 to schedule E. (line 20?)
The final result from Schedule E goes on line 17 of form 1040.

Answer 3

There probable isn't any stable fee located on the land. commonly the assessment you get from the county is for the completed belongings, no longer basically the land. check out comparable vacant land on your section. We use a prevalent of 12% for the land for mid-Michigan. that could, or won't artwork on your section. you could probable purely use the unique fee by using fact it replaced into basically six months later - or you need to use despite technique seems functional to you to fee the present industry fee of the construction. What ever you do, shop your documentation and the reasoning in the back of why you chosen to apply the fee you chosen to apply...