Thank you. To clarify, ALL questions are related to our vacation rental condo. I only mentioned that we'd sold our primary home in 2022 but didn't move into our vacation rental condo to become our personal residence until 2023, in case it mattered. On the rental condo we had 2 large property improvement projects: the HOA-mandated property improvements which cost us $20k over 3 installments in 2022 (that was to "reskin" the outside of the poured concrete building, and remediation work to compromises in the patio and common area concrete, window repairs/replacement, painting etc - so it appears to qualify for definition of "property improvement"), then we also did a bathroom remodel project to OUR unit in December 2022/January 2023 which cost about $25k, then we moved in February 2023. We never rented the vacation condo out in 2023. We "could" have, just didn't. Since I know I have a choice of 2022 or 2023 as to when to officially convert it on tax return, I wanted to explore the options and benefits.
So -- for the bathroom renovations we absolutely shouldn't expense nor depreciate in 2022 because it never went in service in 2022. Ditto for HOA-mandated property improvements, correct? In fact, we won't report EITHER of those on our tax returns for either 2022 or 2023 because the unit never went back "in service", correct? But I DO want to keep good records of those assets because I might need them to add to the cost basis in the future if one of those 3 events occurs, correct? If yes, I didn't realize that improvements could add to one's cost basis on property that was NOT investment property. And since you're telling me to just go ahead and "convert" the condo to personal use as of December 2022, I'm just seeking clarity that if it becomes our primary residence at that time, we can still use both the HOA improvements and bathroom remodel to add to our cost basis in the future??
If I have all this right, based on similar posts it looks like I'd still go thru my Schedule E entries just as I normally would to capture the Jan - Nov rental income and expenses. I just won't address AT ALL the 2 big improvement projects. But then I also need to follow the leads for converting the property, effective December. All correct? Thank you again!!!
