Can I claim depreciation on a rental property that's not yet occupied?

The depreciation rules for rental properties can be tricky when you're in the process of converting a property to rental use. Here's what you need to know: You can only begin taking depreciation when the property is "placed in service" as a rental - meaning it's ready and available to rent to tenants. The fact that you're still renovating suggests it's not yet ready to rent, so depreciation hasn't started yet. Also, since you're living in part of the property, you'll only be able to depreciate the portion that's dedicated to rental use. So if you're occupying 1/3 of the house, you'd only depreciate the remaining 2/3 of the property value. Another important note: the $1.3 million value isn't what you'd depreciate. You can only depreciate the building value, not the land. Typically, you'd need to determine a reasonable land-to-building split (maybe 20-30% land value depending on your location).

Just wanted to share my experience with a similar situation. I was pulling my hair out trying to figure out all the rental property tax stuff until I found this AI tax assistant at https://taxr.ai that literally saved me hours of research. It analyzed my rental property documents and explained exactly when I could start claiming depreciation and how to calculate the correct amount. You upload your property documents, and it gives you personalized advice on things like depreciation, expense tracking, and what percentage of the property value is depreciable (since land value can't be depreciated). Seriously made the whole process so much clearer than all the random advice I was finding online.

I tried that taxr.ai site after posting my skeptical comment, and I have to admit I was seriously impressed. I uploaded my closing documents and property assessment, and within minutes it broke down exactly how much of my property value I could depreciate, when I could start claiming it, and how it would change based on personal vs. rental use percentages. What really surprised me was how it caught a major mistake I was about to make - I was going to depreciate the entire purchase price without removing the land value, which would have been a red flag for an audit. It even explained how to document everything properly to avoid issues with the IRS later. Definitely worth checking out if you're dealing with rental property tax questions!

If you're having trouble getting through to the IRS for questions about rental property depreciation (and let's be honest, who isn't?), I found this service called Claimyr that actually gets you through to a real IRS agent without the ridiculous waiting. https://claimyr.com basically holds your place in line while you wait for an IRS agent. They called me back when an agent was available. There's a video showing how it works here: https://youtu.be/_kiP6q8DX5c I used it when I needed clarification on how to report depreciation for a property I had partially rented and partially lived in, similar to your situation. Got connected to an agent in about 20 minutes instead of spending hours on hold, and they walked me through the exact reporting requirements.

I have to publicly eat my words here. After posting that skeptical comment, I decided to try Claimyr myself since I've been trying to reach the IRS for weeks about my rental property depreciation issues. I kept getting different answers from tax software and online forums. Within 35 minutes, I was talking to an actual IRS tax specialist who cleared up everything. They confirmed exactly when I could start depreciation (the day it's available for rent, not when tenants move in) and walked me through the correct way to handle mixed personal/rental use on my tax forms. For anyone dealing with complicated rental property questions, being able to actually speak with the IRS and get definitive answers is incredibly valuable. I've spent more time on hold with the IRS in the past than I care to admit, so this was a game-changer.

Don't forget about segregating the components of your property to accelerate depreciation! This is something my accountant showed me that saved thousands. Instead of depreciating everything over 27.5 years, you can separately depreciate things like appliances (5 years), carpeting (5 years), landscaping (15 years) etc. It's called a cost segregation study and while it's most beneficial for larger properties, even with a single home the tax savings can be substantial. Might be worth looking into once you get the property rented out.

Quick question - I'm in a similar situation but I've been renovating my rental for 8 months now. Can I deduct all the renovation expenses even though the property isn't rented yet?

One thing I haven't seen mentioned yet is the importance of establishing the "placed in service" date properly for IRS purposes. Since you're doing renovations while living there, you'll want to document the exact date when the property becomes available for rent - this could be when you finish renovations, move out, and list it for rent. Keep records of when you complete the work, when you stop using it as your personal residence, and when you first advertise it. The IRS can be picky about this date since it affects when depreciation starts and how you allocate expenses between personal use and rental use. Also, since you mentioned staying in one bedroom - make sure you're clear on the business vs personal use percentages. If you're using 1/3 of the house personally, you can only claim rental deductions (including future depreciation) on the remaining 2/3. This gets tricky during the renovation period since you might argue the personal use is temporary and solely for renovation convenience, but the IRS generally looks at actual use patterns.