I am sure that you have had this question a million times, but I moved and rented out my house since 2000. I have a very good job and rented out the house not to make any income, but to pay down principal and basically make the payment until I was ready to move back in. After 10 years, I have realized that I am not going move back in, and also sell it in about 4 years. On my yearly taxes, the income (or loss) on this rental is within $500 either way depending on larger repairs, excessive snow removal, etc....I have not claimed depreciation in any way in 10 years. The house was refinanced for roughly $90,000 (wo/land) in 2000, I owe roughly $70,000 (wo/land) and is now real world sellable for $125,000 (w/land). What does it really mean for depreciation in this case? We are not talking about $250,000 in gains and income for the past couple of years. What would it help going back 3 years and updating my returns? If it does help, would I have to start with depreciating the value of the house from roughly 2007 at $100,000 or start in 2000 with $100,000 and manually depreciating from 2000 using the 27.5 rule and then start with whatever number that is in 2007.

Thanks in advance,
Mike