It depends. If your property is available for rent even while renovations are taking place then you add it to the depreciation tables as a new asset if it is considered as structural components (see definition below). This would be added as an asset called 'Improvements-2024' in your rental property. As you noted, if you are not completely finished with renovations then you would not add any improvements until completed and the property is open and available for rent. Instead you would add that improvement when it is completed in 2025.
IRS definition of Structural components (for your review):
Parts that together form an entire structure, such as a building. The term includes those parts of a building such as walls, partitions, floors, and ceilings, as well as any permanent coverings such as paneling or tiling, windows and doors, and all components of a central air conditioning or heating system including motors, compressors, pipes, and ducts. It also includes plumbing fixtures such as sinks, bathtubs, electrical wiring and lighting fixtures, and other parts that form the structure.
- Vacant rental property. If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. However, you can’t deduct any loss of rental income for the period the property is vacant.
- IRS Publication 527, page 6
- Watch the questions in TurboTax to make sure a loss is not allowed if this fits your situation.
- Example: Did you rent this property at fair rental value all of 2024?
@Raeka
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