Yes, all capital improvements must be accounted for separately so these can be depreciated accordingly. You are in luck. I will provide you with a step by step process so you can happily report these in your return. You are the first to witness my step by step instructions.
- Select the federal tab, then go to wages and income.
- Scroll to Rentals, Royalties and Farms click on the drop down that says show more
- Select Rental Properties and Royalties (Sch E) Select start
- Then you will go through a series of questions regarding your rental property.
- Once these questions are answered, Turbo Tax will take you to a Rental Summary Screen. Note, you may have this information recorded already.
- From this screen, select Assets/Depreciation> select start
- Select yes when the program asks you if you have assets for this property that can be depreciated
- I would start with entering information about the rental unit itself. Once you complete this, the program will take you to an asset summary screen. Here is where you can add additional assets such as appliances, carpeting, etc. This includes bath reno. In tax terms, consider these depreciable assets rather than improvements.
- I would consider bath reno as Residential Real Estate since it is a part of the permanent structure of your house.
- Now how to assign the sales proceeds values to your assets. This is a gray area that requires a great deal of speculation since there is no Standard Operating Procedure. I have included this TurboTax link as a guide.
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