We purchased a townhome june 2024

[RealtorinAZ]

Since closing carry costs and rehab costs are all that has happened we are a few months away from completing the renovation.  Unsure if the costs in 2025 can be added to acquisition cost calculation next year vs current year only what was spent by 31 Dec 2024?

[MonikaK1]

If you are planning to use the townhome as a rental:

The basis of property used in a rental activity is generally its adjusted basis when you place it in service in that activity. This is its cost or other basis when you acquired it, adjusted for certain items occurring before you place it in service in the rental activity, such as major improvements.

Continue to track expenditures that can be added to the basis of the property while you are preparing it for rent, even if that continues until next year. When the property is held out for rent at a fair rental value, you start depreciating the property (excluding the land value).

See IRS Publication 527 for more information.