I am currently renting out a single room in my house for the first time. As I was totaling expenses for the year and preparing for tax season I came across a question that I will face in the future: When I take depreciation for the single room that is currently rented out this year, how does that affect the depreciation calculations in the future when the whole house is rented out? Do I start a 27.5 year schedule for that one bedroom (say 15%, haven't done the math yet), and then begin the remaining 85% on its own 27.5 year schedule when the whole house is rented out? Do I subtract the amount depreciated from the FMV when beginning the whole house's schedule (combining the two schedules in effect)?
In my case the lesser of purchase price and current FMV will likely be the purchase price given appreciation since the purchase and current trends, but as a bonus- what if there is a difference in FMV between when the single room was rented out and the whole house is rented out? This may not matter depending on the answer to the above, but I'm imagining a scenario that straddles 2007-2009 in Las Vegas for example, where the market has dropped and FMV when renting the whole house could be lower than when purchased and a single room is rented. I appreciate any experts out there.
