@TaxGuyBill   I don't read that as saying that the depreciation starts with a new useful life, but I don't read it as saying otherwise, either.  And it's an important issue for people in a situation with which I'm familiar.  State Department employees often serve one assignment in Washington DC, then one or two assignments at a foreign post.  To avoid being priced out of the DC real estate market, they keep their home there and rent it out while away.  Using your method, the annual depreciation of the original cost would be less every time they converted it back to rental use.  I don't think that's what most people do, but maybe they should.