Are there any tax consequences for depreciating an income property? 4 Answers as of January 30, 2012

Yes. You should see a CPA or a tax attorney, as the significance cannot be determined without more facts.

Yes, any gain that is attributable to the depreciation, called recapture, is taxed as ordinary income. Also, you cannot avoid tax on this recapture income under the $250,000 home residence exclusion.

Yes, as you write it off it each year it benefits your bottom line. However, when you sell it, you must recapture the depreciation and it is taxed at ordinary income rates. However, if you occupy the property and establish it as your residence, when you sell it you have up to $ 500,000 of recognized long term gain. But your basis is what you paid for it minus any depreciation, also because it was used as a business asset before it became your residence you might still have to claim the recaptured depreciation. That issue would take some serious research.

Not at the time you begin to occupy it. Your tax basis will be lower because of the depreciation and the depreciation recapture won't qualify for the homesale exclusion when you later sell the home. The time the property was rented out won't count as occupancy time for purposes of qualifying for the exclusion.