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sviyer
Level 3

Did a major bathroom repair in Dec 2018. Then, in 2019, I rented out part of my house, which included that bathroom. Can I deduct the repair in 2019 taxes?

 
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AnnetteB6
Employee Tax Expert

Did a major bathroom repair in Dec 2018. Then, in 2019, I rented out part of my house, which included that bathroom. Can I deduct the repair in 2019 taxes?

No, the cost of the repair cannot be deducted directly on your 2019 return regardless of whether that portion of your house is now being rented.  Since the cost was incurred in 2018 and the part of your home was not rented until 2019, you would not deduct it on your 2019 return.

 

To know if there is anything you can do on your tax return with regard to this cost, you need to determine if the 'major repair' was a repair or an improvement.  A repair would restore the bathroom to good working condition such as the case if something were broken or damaged and was in need of repair.  An improvement would make your property more valuable or extend the useful life of the components of the bathroom.  An improvement would also be a permanent part of the structure of your home.  

 

When you begin renting a portion of your home, that rental portion will be depreciated based on the square feet of the rental space versus the total square feet of your home.  When the information is entered to calculate the depreciation, the cost basis for your home is one piece.  If your 'major repair' can be considered an improvement and not a repair, then the cost of the repair will be added to the cost basis of your home.   

 

 

@sviyer

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4 Replies
AnnetteB6
Employee Tax Expert

Did a major bathroom repair in Dec 2018. Then, in 2019, I rented out part of my house, which included that bathroom. Can I deduct the repair in 2019 taxes?

No, the cost of the repair cannot be deducted directly on your 2019 return regardless of whether that portion of your house is now being rented.  Since the cost was incurred in 2018 and the part of your home was not rented until 2019, you would not deduct it on your 2019 return.

 

To know if there is anything you can do on your tax return with regard to this cost, you need to determine if the 'major repair' was a repair or an improvement.  A repair would restore the bathroom to good working condition such as the case if something were broken or damaged and was in need of repair.  An improvement would make your property more valuable or extend the useful life of the components of the bathroom.  An improvement would also be a permanent part of the structure of your home.  

 

When you begin renting a portion of your home, that rental portion will be depreciated based on the square feet of the rental space versus the total square feet of your home.  When the information is entered to calculate the depreciation, the cost basis for your home is one piece.  If your 'major repair' can be considered an improvement and not a repair, then the cost of the repair will be added to the cost basis of your home.   

 

 

@sviyer

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

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sviyer
Level 3

Did a major bathroom repair in Dec 2018. Then, in 2019, I rented out part of my house, which included that bathroom. Can I deduct the repair in 2019 taxes?

Thank you very much! This is very helpful!

Carl
Level 15

Did a major bathroom repair in Dec 2018. Then, in 2019, I rented out part of my house, which included that bathroom. Can I deduct the repair in 2019 taxes?

Your repair expense is not deductible because it was done well before the property was "available for rent". Cost incurred in preparing a property for rent for that very first time are "never" deductible.

However, you need to understand the difference between a repair and a property improvement. What yuu call a "major repair" may in fact, be a property improvement.

It's important to note that when it comes to determining the percentage of square footage of your property that is classified as rental, it's that square footage that is "exclusive to the renter". So if this is a one bath house then there is no way the bathroom is exclusive to the renter. However, if it's got two or more baths ***AND*** that bathroom can only be access from the bedroom that "is" exclusive to the renter, then you can include the floor space of that bath in the percentage of square footage that is "exlusive to the renter".

So if the bath you did the work on is "exlusive to the renter" and if what you call "major repairs" is in fact, property improvements, then you can include your cost of the property improvements by adding it to the cost basis of the "ENTIRE" property, and classifying "that" "specific" "property" "improvement" as 100% business use from the date it was placed "in service".

Rental Property Dates & Numbers That Matter.

Date of Conversion - If this was your primary residence before, then this date is the day AFTER you moved out.
In Service Date - This is the date a renter "could" have moved in. Usually, this date is the day you put the FOR RENT sign in the front yard.
Number of days Rented - the day count for this starts from the first day a renter "could" have moved in. That should be your "in service" date if you were asked for that. Vacant periods between renters count also PROVIDED you did not live in the house for one single day during said period of vacancy.
Days of Personal Use - This number will be a big fat ZERO. Read the screen. It's asking for the number of days you lived in the property AFTER you converted it to a rental. I seriously doubt (though it is possible) that you lived in the house (or space, if renting a part of your home) as your primary residence or 2nd home, after you converted it to a rental.
Business Use Percentage. 100%. I'll put that in words so there's no doubt I didn't make a typo here. One Hundred Percent. After you converted this property or space to rental use, it was one hundred percent business use. What you used it for prior to the date of conversion doesn't count.

RENTAL PROPERTY ASSETS, MAINTENANCE/CLEANING/REPAIRS DEFINED

Property Improvement.

Property improvements are expenses you incur that add value to the property. Expenses for this are entered in the Assets/Depreciation section and depreciated over time. Property improvements can be done at any time after your initial purchase of the property. It does not matter if it was your residence or a rental at the time of the improvement. It still adds value to the property.

To be classified as a property improvement, two criteria must be met:

1) The improvement must become "a material part of" the property. For example, remodeling the bathroom, new cabinets or appliances in the kitchen. New carpet. Replacing that old Central Air unit.

2) The improvement must add "real" value to the property. In other words, when  the property is appraised by a qualified, certified, licensed property appraiser, he will appraise it at a higher value, than he would have without the improvements.

Cleaning & Maintenance

Those expenses incurred to maintain the rental property and it's assets in the useable condition the property and/or asset was designed and intended for. Routine cleaning and maintenance expenses are only deductible if they are incurred while the property is classified as a rental. Cleaning and maintenance expenses incurred in the process of preparing the property for rent are not deductible.

Repair

Those expenses incurred to return the property or it's assets to the same useable condition they were in, prior to the event that caused the property or asset to be unusable. Repair expenses incurred are only deductible if incurred while the property is classified as a rental. Repair costs incurred in the process of preparing the property for rent are not deductible.

Additional clarifications: Painting a room does not qualify as a property improvement. While the paint does become “a material part of” the property, from the perspective of a property appraiser, it doesn’t add “real value” to the property.

However, when you do something like convert the garage into a 3rd bedroom for example, making a  2 bedroom house into a 3 bedroom house adds “real value”. Of course, when you convert the garage to a bedroom, you’re going to paint it. But you will include the cost of painting as a part of the property improvement – not an expense separate from it.

sviyer
Level 3

Did a major bathroom repair in Dec 2018. Then, in 2019, I rented out part of my house, which included that bathroom. Can I deduct the repair in 2019 taxes?

Thank you @Carl! Using this information I was able to successfully file my returns. Thanks again!

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