I have about $6000 worth of pre-rental expenses on things like utilities, painting, landscaping, plumbing, electrical, etc. that I would like to depreciate, if possible.
I would think you would want to keep your depreciation amount as low as legally possible each year. Remember, depreciation is not a permanent deduction. When you sell the property all prior depreciation is recaptured and taxed. Two things to keep in mind with that.
1) Recaptured depreciation is added to your AGI
2) The increased AGI can have the potential to bump you into the next higher tax bracket.
"Expenses" incurred before the property was placed in service and "available for rent" are flat out not deductible. Period. If they are, then someone please point out to me in IRS Publication 527 at https://www.irs.gov/pub/irs-pdf/p527.pdf where it says you can.
"Property improvements", as I defined earlier in this thread, are added to the cost basis. It does not matter when the property improvement was done either - be it before you converted it to a rental, or after. It still adds value to the property.
Typically, with property improvements done before you converted the property to a rental, those will have the same "in service" date as the property itself. So they can just be added to the cost basis and included in that initial asset entry for the property itself. If it's a depreciated improvement, it gets added to the structure cost. If it's a non-depreciated land improvement, it gets added to the land cost.
Now you can list "all" property improvements as separate assets if you want, even though they may have the exact same "in service" date as the property itself. But either way you do it, it still increases the over all cost basis any way you look at it.
Generally, the only time you would enter a property improvement as it's own separate asset, would be if that improvement is placed "in service" any time after the property was originally converted and placed in service. I know others enter them separately no matter what, for their own book keeping needs.
