How to figure basis including capital improvements to rental before placing into service? Is depreciable basis of improvement reduced by the land/buildings allocation?

[jpartsch]

@Carl , yes, and this is why I ultimately followed the method you outlined above - in order for the other method to work, you would have to add the cost of the renovation back into the percentage allocated to site improvements (buildings) on the screen where it asks for the breakdown from the property tax bill. I was uncomfortable kludging it together this way, and that's why I followed your method in the end.

Also, yes, I do understand the difference between the depreciation and a deduction, what I meant to imply was that either method (as long as the cost of the renovation is added back in on the property tax bill land/improvements breakdown screen) yields the same figure for business income/loss and thus the same figure for taxable income for the year in question.

[Carl]

I've not done any programming for over 15 years now. But I suspect this issue will never be "fixed" because of limits that may be imposed by the programming language itself. In other words, fixing this particular problem may create 3 more, and fixing those may just create more, and so forth.

Generally, when you have a high cost basis and you add to it a comparatively low cost property improvement, the difference it makes may not be all that much. But if you have a $50K property improvement and basically "lose out" on $15-20K of depreciation, that can be a double edged sword when you sell the property later, and have to deal with the depreciation recapture.