I am assuming question 1 is for the rental property and question 2 is for a completely separate property that is/was your primary residence.
For question 1: Assume I'd have to split the reporting between 2022 and 2023 because actually paying was split?
No. That assumption is wrong. You'll enter absolutely nothing concerning this property improvement on your 2022 tax return, because there's no way that property improvement was placed "in service" in 2022, since the project was not completed before the end of the year. You'll enter the entire cost of the property improvement next year, on your 2023 tax return with an "in service' date of the first day in 2023 that an occupant "could" have lived in the property. That would be the date you told the management company to start renting it out again. Keep reading below, to see if you'll enter "anything" concerning the property improvement on "any" tax return.
2. We sold our primary residence in 2022 and have determined that to not be tax reportable -- and we decided to move to our vacation rental as our primary residence in February 2023. I am wafflng about converting it in 2022 or 2023. At first I wasn't going to deal with converting the vacation rental to personal use until 2023, but after reading your comments to the other post I'm wondering if we should go ahead and covert it to personal use in 2022, even though we didn't move in until 2023?
If the property was not rented at all in 2023, I would suggest you convert the vacation rental to personal use on the 2022 taxes with a conversion date of Dec 1, 2022. That will stop all depreciation on that date. With that, you will not enter anything concerning your property improvements on any tax return, since they would not have ever been placed "in service" after Dec 1, 2022. However, keep all your paperwork on the improvements, as you will include it in your adjusted cost basis if any one of three things happens in the future.
1. You convert the property or any part of it back to a rental.
2. You sell the property.
3. You die.
Now, if you did have a paying renter in the property in 2023, then you'll have to wait until next year to convert the property to personal use on your 2023 tax return. When you do that, you will still not enter your property improvements, since doing so would mean they were "in service" as a rental asset for less than a tax year. When you have a rental asset that is placed in service as an asset and then converted to personal use in the same tax year, you don't depreciate it. But still, keep the paperwork for the improvements for reasons already cited above.
3. To complicate further, we also had $20k worth of HOA-required property improvements we paid for in 2022. I know based on your reply to the poster who was SELLING his property, you recommended he not depreciate the improvements because he has to recapture all the carryover when it's sold. Is recapture issue the same when we convert to personal use but don't sell?
What specifically was the assessment for? It matters, as that determines if it's treated like a property improvement or an expense. If it helps save you time, see IRS Publication 527 at https://www.irs.gov/pub/irs-pdf/p527.pdf on page 8 under the heading, "Assessments for local improvements" in the 2nd column. See if that answers this question for you.
