Deducting equipment expenses on new construction rental

[cottagecharm11]

We are building a rental house. We spent almost $3000 renting a manlift. Knowing we would need to rent the Manlift many more times before the project is done, we decided to buy an older used manlift for $17,000 in December 2023. After this job is done we will take it home and convert it to personal use. There have been expenses for necessary repairs as well. We hope to place the rental into service in the fall of 2024. If we don't depreciate  the manlift, can we deduct the cost of the diesel to drive 466 miles to pick up the manlift, and the cost of parts and repairs as expenses to add to the basis of the rental?

[Mike9241 · Accepted solution]

According to the Internal Revenue Service (IRS), you can generally deduct expenses of renting property from your rental income. However, the expenses incurred while building a property for rental are not immediately deductible. Instead, they are added to the cost basis of the property and are depreciated over a period of 27.5 ...

so the rent on manlift gets added to the cost.

the purchase of the manlift must be depreciated and the depreciation adds to the cost. when it's converted to personal use it is deemed sold to you for fair market value. so at that point gain or loss is recognized depending on the FMV vs tax basis at that time.  those repair costs for the manlift either get added to the cost basis of the house unless they improve the manlift in which case they get added to the depreciable basis. costs of moving it after the job is done is a nondeductible personal expense.