No. Capital improvements that add to the value of your rental property, prolong its life, or adapt it to new uses must be depreciated over a period of time rather than deducted as a current-year expense. This would include things like:
- Remodels and room additions (including decks and porches)
- New or upgraded landscaping, irrigation, sprinkler system
- Hardscape such as pavement, block or retaining wall, patio
- Swimming pool, spa
- Storm windows, doors
- New roof
- Central vacuum or security system
- Upgraded wiring, plumbing, duct work
- Central heating, AC, humidifier
- New furnace, water heater
- Filtration, soft-water, or septic system
- Built-in appliances
- New flooring or wall-to-wall carpeting
- Upgraded insulation
- Satellite dish
In other words, if you spent $8,000 on a new roof last year, the IRS won't let you deduct the entire $8,000 from last year's rental income. Instead, the $8,000 must be depreciated, which means you deduct it over a period of time instead of all at once.
To enter your rental improvements, simply follow the directions to enter your rental income and expenses. At some point you'll come across the Rental Summary screen.
Select Start next to Asset/Depreciation and follow the onscreen instructions. We'll figure out which depreciation method works best in your favor.
Note: Although it doesn't seem logical, refinance fees and mortgage points are also entered in the Assets/Depreciation section. The IRS considers these amortizable intangibles and accounting rules dictate that those are to be depreciated instead of deducted as an expense.
- Where do I enter income and expenses from a rental property?
- What is rental depreciation and how does it differ from an expense?
- What kinds of rental property expenses can I deduct?
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Thank you for noting that it needs to be reported as assets and therefore depreciated over time.
My question now is around timing: I haven't entered anything about my rental in my 2019 tax returns. Can I now enter those assets or expenses in my 2020 tax returns?
No. Every tax year is separate. To claim prior year expenses, you need to amend that year's return.
Looking for a prior year return? Go here.
You can amend e-filed returns if they've been accepted; paper-filed returns may be amended once they've been mailed.
Select your tax year for amending instructions:
Keep in mind: You have 3 years from the date you filed your return or 2 years after you paid the tax due (whichever is later) to file an amendment.