As a renter of real property, you are not eligible to take depreciation on the renovations you made to this property. Even if you were the owner of the property, you would not be able to take full depreciation of the renovations in one year. Depreciation is an accounting method that spreads the cost of an asset over its expected useful life.
To take depreciation on property it must meet all the following requirements:
- It must be property you own.
- It must be used in a business or income-producing activity.
- It must have a determinable useful life.
- It must be expected to last more than one year.
- It must not be excepted property. Excepted property (as described in Publication 946, How to Depreciate Property) includes certain intangible property, certain term interests, equipment used to build capital improvements, and property placed in service and disposed of in the same year.
Even if you owned the property you could not accelerate the depreciation to take it all in one year unless the property is eligible for Section 179 treatment. Section 179 can only be taken in the taxable year you place the qualifying property in service. Real Property does not qualify for the Section 179 Deduction. Real Property is typically defined as land, buildings, permanent structures, and the components of the permanent structures (including improvements not specifically covered on the qualifying property page).
Topic 704 Depreciation
Non-Qualifying Property for Section 179
You asked the question: Would I dispose of this asset as a sale with a value of $0? You have no asset to dispose of.
