Capital improvements on rental property deductions at sale

[64gw]

I sold  a rental property that I owned for 31 years and was my primary home for the first 20 years.  In turbo tax I have not been able to deduct the capital improvements that I made to the property in turbotax premier.  A typical cap. improvement was a hvac/ac replacement.  I had to do this two time over the life of the property.

Any help would be appreciated

[ColeenD3]

What do you mean you haven't been able to deduct it? Did you add it as an asset in the asset section and depreciate it over 27.5 years? It should show on your depreciation worksheet if you did.

Did you make the improvement before you converted to a rental property? You would have had to include the adjusted basis of the property before you began to rent it.

[64gw]

The Improvements were made before I started renting the property when I was living there

[ThomasM125]

An A/C unit would not be a capital improvement that would be added to the cost basis of the property. It would be depreciated separately as it will only last fifteen years or so. You should have added it as an asset when you placed the property into service at it's fair market value and then depreciated it.

You should have taken the deduction in the form of depreciation over the years and it is too late to do that now without going through a lot of trouble to deduct depreciation not previously taken.

If you made more permanent improvements, like adding a family room for instance, you could add the improvement now by entering the cost and date put into service for the rental in TurboTax. It would be depreciated over 27.5 years, so there would be some undepreciated balance left that may reduce your taxable gain on sale of the property. You would have to recapture the depreciation not taken but allowed, however, so that would reduce the deduction otherwise allowed.

[Carl]

The Improvements were made before I started renting the property when I was living there

Then the cost of that improvement should have been included in the cost basis of the property as a whole, when it was originally converted to a rental 10+ years ago, and would therefore not be listed as a separate asset anyway. If this was not done, then I would leave well enough alone.

To do it now would required you to file a form 3115  - Change in Accounting Method, in order to add those items and account for 10+ years of depreciation you did not take. Not only would the cost of this be high, but the 3115 is not simple by any measure and requires professional help. That professional help is not free either, of course.