Generally, a property improvement includes all costs incurred directly or indirectly related to that property improvement. That would include the cost of labor, materials, shipping, etc. Basically *ANYTHING* even remotely tied to the improvement. So that would include the cost of cutting holes in the walls and repairing those holes.
Technically, your cost of repairing the holes in the walls are not classified as a repair, because those holes were not created for no reason at all or by accident. They were created for the explicit and specific purpose of re-wiring the house. Therefore you didn't "repair" anything really. It was a cost incurred as "a part of" the property improvement. So it's included as "a part of" the property improvement.
Your total cost for this project gets entered in the assets/depreciation section, classified as residential rental real estate and depreciated over 27.5 years. This project is "NOT" eligible for SEC179 deduction or the 50% special depreciation allowance.
TurboTax will ask you the question, because the program has no possible way of knowing what property improvements are or are not eligible. But this project is not because without question, this improvement did become "a physical part of" the structure itself.
