Dear Experts on this thread,
I have a very similar question to the one posed in this thread that was answered so well. I also had a huge water loss in a rental property. 3rd floor bathroom had a catastrophic pipe failure and tenants were out of town. By the time they returned, the whole property was soaked through. Every floor, most walls and ceilings on all of the lower floors had to be ripped out. It was down to studs to dry out.
It had been a rental property for 12 years, and is now currently rented again. The time period spanned over 2 years (it was a really big house), but the actual restoration and renovation work only started in 2023.
I'm trying to figure out if I write off some of the previous undepreciated portion of the home in the 2023 tax year ( yes - i know I'm very late - but have paid in well enough to cover me from penalties and interest) and how to report all of the new balances. We did have a mix of things covered by insurance and those that we chose to upgrade as with everything gutted it was the perfect time to do some repairs. The overall split was probably around 60% restoring property to previous level, 40% upgrades to the property.
We did get covered for our loss of rental income by insurance but only for 1 year.
My questions are how do I write off part of the previous depreciable base of the property. For example, 1 bathroom, a laundry room, a kitchenette were destroyed in the leak, but the main kitchen was fine as well as the other bathrooms.
Any help would be much appreciated.
