My wife bought and paid off a condo before we got married. We then started renting it out in 2021. We sold it in the middle of 2023, but not before putting about $70K into renovations.
I'm a little confused since this property seems to fall into two different income sections. The sale of a home, where the cost basis should be the purchase price + 70K, and then the rental section which asks if we sold the rental.
My first question is really looking for confirmation that I fill out both sections--both the sale of the property and rental income which also asks if we sold the property.
My second question is about the renovation cost. I'm trying to figure out if it's double-dipping to add the renovation cost on to the cost basis of the sale of the home as well as list it as an improvement for the rental in 2023. Taxes on $70K is obviously a sizeable amount, so I don't just want to hand money to the IRS that we're allowed to keep, but I also don't want to run into a situation where we get screwed because the IRS says that although we renovated the rental, we didn't actually rent it after renovating, so we shouldn't deduct that from rental income.
I'd appreciate any direction you can give me.
