Help me understand depreciation on a rental property

You can take the value of the entire property (250k), subtract the land value (50k), giving the house a value of 200k. You can depreciate that 200k over the next 27.5 years (7,250 per year). The value of the land is calculated on your property tax bill.

Lets say you make 2k per month in rent (24k per year).

Deduct your expenses (lets say 2k), mortgage interest(lets say 12k), property tax (lets say 2k) and depreciation per year (7,250).

24k - 2k - 12k - 2k - 7.25k = 2,750 of rental income that will be added to your taxable income

This is my current understanding. I'm new to the game as well and still learning.

Passive loss rules may limit your ability to deduct losses from the rental property against your other income. Check with your tax adviser

Bottom line is, unless your modified AGI is too high, you are allowed to deduct up to $25,000/year of rental property losses (passive loss rules).

Any losses you cannot deduct are deemed "suspended losses", which can be deducted against passive income in future years or deducted in full when you dispose of that rental property.

I believe the maximum modified AGI at this point is $150,000.

Some good answers in here.

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The actual value of the house differs from the land, correct? If so, how does one deduce the value of the house?

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Building is depreciable, land is not. There are a few ways to do this.

1) Get an appraisal to look at it and determine. Almost no one does this especailly for single family residential.

2) Your tax assessor may have an allocation, so you can use the same pro-rata percentages against your total value at the time you place the property into service as a rental.

3) Allocate 80% to building and 20% to land. This is what most people do.