I spent $64K remodeling a rental property in 2017, I sold the property in 2018. How can I take the entire amount against the sales profit?

[jeaniesean]

I spent $64K remodeling rental prop in 2017. I filed schedule E and form 8582 which allowed me to deduct $25K of that; however, i did not need to use the $25K to avoid taxes. I sold the property in 2018. I have a sales profit. i can refile 2017 return if necessary. How can I claim the entire remodel cost against the sales profit?

[Leonard · Accepted solution]

If all of your remodeling was considered a capital improvement then you would add the cost to your adjusted cost basis for the property and not deduct any of the cost as an expense.  If the $64K you spent in 2017 was for capital improvements then that entire amount should be added to your adjusted cost basis and the $25K expensed should be removed as an expense in 2017.  The adjusted cost basis will be used to calculate your gain or loss on the sale in 2018.  A capital improvement is the addition of a permanent structural change or the restoration of some aspect of a property that will either enhance the property's overall value, increase its useful life or adapt it to new uses.