Technically, Turbotax will allow it. I had to make the in service date the same as the sale date for each capital improvement I listed so it would stop trying to depreciate it for one month and then TT trying to recapture it. Regardless, although I put my capital improvement in the correct place (same page as where you depreciate your rental), the losses from my capital improvements were not applied to cost basis of rental but instead used to offset other income on schedule 1 and then went to 1040 Line 7. Im still trying to get help on this but I thing it is because I chose the option "active participant" which allows you to carry over rental losses to offset ordinary income up to $25,000. Turbotax always tells you the good side but not the bad side. I think by choosing active participant, this disallows you from offsetting your capital gains with your losses from the capital improvements (ie new roof, addition to house, etc). Im not talking about expenses here that offset your rental income each year.
