Level 14
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Investors & landlords

say as above the cost was less than $5,000,   either take as an expense (best because there is no recapture)   any loss disallowed is allowed in the year the property is sold so you would get the deduction in 2019.    or you could take depreciation on it.   thus the basis would go up by the undepreciated value reducing the gain. that part of the gain attributable to depreciation allowed or allowable on the property  is recapture as section 1250 gain.  This includes depreciation on the building and any capital improvements such as the kitchen remodeling. 

the rates on 1250 gain are generally higher that the capital gain rates. .