n 2020 we put over $20k in repairs and improvements.
Understand that it is not common for rental property to have a taxable gain on paper each year. Especially if you have a mortgage on the property. Additionally, your passive rental expenses can only be deducted from your passive rental income. Once those expenses get the taxable rental income to zero, that's it. Any remaining loss is carried over.
But there is an allowance for a maximum of $25K to be deducted from other ordinary income each year, if you qualify. But of course, you've got to meet the criteria, and you must have the "other taxable income" to deduct it from.
So if "before" you figure in the costs of improvements, you have already met your maximum, using the de-minimus election just flat out will not help you at all on your tax liability for 2020. The loss just gets carried forward, where it may or may not help in a future tax year. Also, not all improvements qualify for the de-minimus election.
Basically, depending on how and when things were done, you may be able to (and find it simpler to) classify everything as a property improvement. For example, replacing the kitchen cabinets and new floors would be a property improvement. If at the same time you replaced that broken door knob (a repair) just include it in the cost of the improvement since it was "a part of" the same update/upgrade project.
Property improvements are capitalized and depreciated over time. They get entered in the Assets/Depreciation section of the program.
Do we need to expense some items and depreciate some items -and/or- carry forward a loss?
If you plan to sell in the next year or two, I would capitalize all I can, since it adds to the cost basis and the depreciation recapture on those improvements for a mere two years would be minimal. But before making that my final decision, I would look at the total of all depreciation already taken on the property. (Assuming that I actually have a choice to take the safe harbor election.)
