Depreciation on reconversion to rental

[Erik Cota-Robles]

My property was a primary residence for 2 years, then a rental dwelling for 23 years, and for the last 4 years has again been my primary residence.  I'm considering moving overseas in the next couple of years and renting it out.

Questions:

1) will the depreciation continue as before for the remainder of the 27.5 year term?  (I.e., 4.5 years).

2) we've done a lot of remodeling, some of which has been non-trivial  (e.g., a new bathroom).  Can those expenses be added to the basis and depreciated?

3) If yes to #2, is the depreciation separate and if so, for how many years?

Thanks.

--Erik

[Eamonn McElroy]

@Ashish Acharya "Based on my understanding, I dont think your recovery period resumes. The asset was changed to personal use. That is change in use. After the change in use, the recovery period restarts."

Correct.  Treas Reg Sec 1.168(i)-4(b) and 1.168(i)-4(c) apply.

If OP's RE asset has been personal use for the last 4 years after being a rental for 23, I imagine she has a decent amount of improvements that need to be capitalized into basis. Important to note that change of use prescribes using the lesser of adjusted basis or FMV. That fridge purchased 4 years ago probably isn't worth what you paid for it initially....