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Old 01-22-2015, 08:21 AM
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Incorrect depreciaton cost basis used in first year

I have a one bedroom condo in Boston and beginning in October of 2013 rented out my living room (sofa bed) on a part-time basis to a mutual friend. Out of the 92 days the portion of my property (25%) was in service as a rental he only stayed 27 days. I used Tax-Act last year for my taxes and reported this rental income for the 27 days. When I got to the part of depreciation I was somewhat confused of what to use as a cost basis. I originally purchased the property (no land comes with it) for $150,000.00 back in April of 2002. I have since refinanced a few times, most recently in November of 2014 taking out some cash on the property to pay off my student loan and credit card debt. For the depreciation cost basis I used 25% of the original purchase price, $150,000.00 and came up with $37,500.00. But what I did then was multiply it by 29.35% (27/92) and entered $11,006.00 as my depreciation cost basis which was depreciated over 27.5 years. I believe I should have used the $37,500.00 and not the $11,006.00 as the tax program would then apply the relative occupancy percentage. I thus shorted myself out of depreciation expense. Not a big deal but my part-time room-mate stayed with me 96 days in 2014. How do I correct my depreciation cost basis for my 2014 taxes?



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