From what I understand an improvement expense can be entered regardless of when it was done. IE my central AC system was installed in 2014, but I still put the expense in because it brings up the depreciation value? Do I understand that correctly?
Next is repairs. Obviously we've had repairs over the years since living in the house. Does this fall into the same circumstances? I have the receipts from all repairs done since we bought the house. But do I need to put those all in or is it only repairs since the unit became a rental. And further on that question, what about repairs made to make it ready for rental (the couple months prior to switching it to a rental property)?
The key words here are what were Improvements and what was Maintenance and Repair.
Improvements are usually Capitalized and amortized to create a Depreciation Deduction for the declared lifetime of the improvement. This means that all of the improvements that you have done to the home from the time you purchased it to the time that you moved out must be included in the Cost Basis of the Home at the time it became a Rental Property. For Example:
- Your Home cost your $70,000
- The cost of the A/C installation and other improvements such as Landscaping, New Roof, Wood Floors, etc. Total up to $30,000.
- This will make the Cost Basis of the now Rental Home $100,000.00.
Regular Repairs and Maintenance that you performed on the home, while you were living in it, do not go into the Cost Basis.
Repairs and Maintenance
The Repairs and Maintenance that you can use for Schedule E of your Tax Return are only those that were done since the property was placed on the rental market.