Can I depreciate my house turned rental at current market value?

Question

We are looking for a new primary residence, and want to turn our house into a rental. Can I depreciate our house based on current values instead of the original sales price 12 years ago? Do I need to get it appraised to prove its current value? Assuming this is an option, is there anything else I need to do to prove this for tax purposes?

Andrew Underwood · Answer

I didn't want to get into the weeds, but you're right that it comes down to numbers, and long term hold versus cash flow strategy. A crystal ball would be helpful in making the latter choice. Loosing out on depreciation for current market value of the house may push the numbers a bit. Thanks for your input.

Sergey A. Petrov · Answer

Selling and re-investing is not always the best choice. Run your numbers... Your sale will cost you 10% in selling fees and expenses. Your purchase(s) will also come with expenses. The trade off isn't always there. Sometimes keeping the property and renting it makes more sense.

Andrew Underwood · Answer

Thanks for the suggestion, Greg. I will discuss it further with my CPA. Depreciation based on the original sale price instead of the current value would be a loss. You might be right, it sounds like selling and reinvesting might be the better way to go.

Greg Scott · Answer

It will be well worth the expense to talk to a CPA.  Beyond depreciation, there are other reasons it may be better to sell and buy one or two new properties.

But, no, depreciation is based on sale price, not market price.