If all of your remodeling was considered a capital improvement then you would add the cost to your adjusted cost basis for the property and not deduct any of the cost as an expense. If the $64K you spent in 2017 was for capital improvements then that entire amount should be added to your adjusted cost basis and the $25K expensed should be removed as an expense in 2017. The adjusted cost basis will be used to calculate your gain or loss on the sale in 2018. A capital improvement is the addition of a permanent structural change or the restoration of some aspect of a property that will either enhance the property's overall value, increase its useful life or adapt it to new uses.
