Specifically for rental activity -
I may review IRS
If that is a rental property - you will deduct mortgage interest
, real estate taxes
However - the value of the property itself - would be depreciated.Depreciation
is an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property. It is an annual allowance
for the wear and tear, deterioration, or obsolescence of the property.
When you sell the rental property - you will realize either gain or loss - that is calculated as (selling price) MINUS (adjusted basis)
The basis is mainly your purchase price - adjusted by purchase expenses, improvements and reduced by depreciation.
When you sell your primary home - the gain is calculated similarly - but you are eligible to exclude that gain from taxable income - up to $250k for single person - if you owned and used the property as your primary residence at least two out of last five years before the sale.
That is regardless how proceeds are used.
Let me know if you need any help.