It depends on if you are operating this business as a qualified real estate professional or a non-professional that is in the business of renting houses. It depends if you report your income on a Schedule C or Schedule E.
If you are operating this business as a qualified Real Estate Professional, the IRS will let you deduct the following startup costs as with any business. Please review this link from IRS.gov for more information.
- An analysis or survey of potential markets, products, labor supply, transportation facilities, etc.
- Advertisements for the opening of the business.
- Salaries and wages for employees who are being trained and their instructors.
- Travel and other necessary costs for securing prospective distributors, suppliers, or customers.
- Salaries and fees for executives and consultants, or for similar professional services.
As far as renovation expenses, according to Turbo Tax agent Irene, there are two elections you can make according to this link. You may take the De Minimis Safe Harbor Election or the Improvements election.
For both elections each asset that you would normally depreciate over a number of years needs to be $2,500 or less. Any asset over the amount of $2,500 needs to be depreciated over 27.5 years and cannot be expensed. This applies regardless on whether you are operating this as a business as a Qualified Real Estate professional or a non-professional. There are restrictions that apply and you can review this in the link I provided above.
When we speak of assets, we are talking about the costs for such improvements such as:
- Putting in a new porch
- Completely renovating a bathroom or kitchen.
- Building a garage
- Repaving a driveway
- New roof
- New carpeting or wood floors
This is just an example of improvements that can be depreciated or expensed. Repairs to these structures are not improvements and can be expensed. For an example, plumbing repairs are an expense but if you put in all new plumbing or upgrade the electrical components of your house, then this is an improvement.
I sincerely hope this is the answer you are looking for.
@kelvnator
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