Unfortunately, this cost is not deductible as a Rental Expense. Improvements and upgrades made before you converted your home to a rental property would increase your adjusted basis.
The total basis in your rental property is depreciated over 27.5 years. So in effect, you will receive depreciation expense for the improvement.
Note, however, that the basis for depreciation is
the lesser of the following amounts.
- The FMV of
the property on the date of the change, or
- Your
adjusted basis on the date of the change.
As long as your adjusted basis is less than the Fair Market Value, you would use adjusted basis as the value for depreciating your Rental Property.
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