I've recently purchased an out of state rental property. I'd like to
be ahead of the game and fully grasp the concept of depreciation so
that when tax season comes around, I won't be clueless.
Also, based on my what I've been reading, does this mean I get a check
from the IRS for $2,178.03?
I am not going to address the math involved in calculating the depreciation. The tax instructions do a good job explaining what happens during the first year. The fact that you know to split the land from the building is a good start.
I am going to address the overall concepts regarding the tax situation with the rental property.
You will have income in the form of the rental payment from the tenant. You want to track all your expenses to reduce the amount of that income that can be taxed bu the federal and state government. Note depending on the states involved expect to have to file in two states.
The most obvious expense you have, the mortgage, isn't as as straight forward as many expect. You can claim the interest you pay as an expense, but you can't claim the principal payment. This is because the amount of the loan wasn't income. This can result in some situations where the landlord thinks the property is losing money but the IRS disagrees.
The good news is that the condo/HOA fee, property tax, house insurance are expenses you can claim. Since some or all of these are funneled through your mortgage company make sure that you get and keep the detailed report from the mortgage company to make sure all the expenses are documented and assigned to the correct year. Sometimes you have to split some expenses across two different years.
There may be other expenses such as a management fee that you don't want to forget. Sometimes the owner pays the utilities, if you do that don't forget to claim them.
Depreciation is a big item. It can makeup for the inability to claim the principal payment.
Because this is the first year you should also make sure that you have fully accounted for the closing costs and other items you paid at closing. Frequently you have to pre-pay for insurance, or taxes. Make sure you don't forget anything, also make sure you don't double count it. Some items on the closing documents could be mentioned on the detailed annual statement from the mortgage company.
All the numbers from this property will be rolled into all the other numbers on your tax forms. Depreciation by itself will not trigger a government check.