Capital improvements that add to the value of your rental property, prolong its life, or adapt it to new uses must be depreciated over a period of time rather than deducted as a current-year expense. You will enter any depreciable assets when you set up the rental property in TurboTax.
To enter your rental improvements, simply follow the directions to enter your rental income and expenses. At some point, you'll come across the Rental Summary screen. Select Start next to Asset/Depreciation and follow the onscreen instructions. We'll figure out which depreciation method works best in your favor.
For the property asset, you will select residential rental and use the full cost of the property, including capital improvements such as a complete remodel of a room or rooms, or the fair market value (FMV) on the date of conversion, whichever is less. You can use the city or county tax assessment to determine the portion that should be land.
You can only depreciate the rental percentage of any asset. The personal portion is never deductible. In addition, common areas count as your personal portion of the property.
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