Made renovation to rental property. Kitchen, tile, appliances and furniture. Total cost around 73000. How do I report this and what form do I use. Using TT premiere

[imadns]

Made major renovation on a rental property that I rent short term as frequently as possible and use it personally for 3-5 weeks per year.

Made renovation to kitchen, changed all appliances, changed tile and painted along with electric work. Changed furniture. Total cost of $73000. What form do I need to enter this info, and under what heading should I enter it, and is there different depreciation schedules furniture versus renovation

Thanks

[Carl]

This should provide you the information you require. If you have additional questions or need further clarification, just ask.

• RENTAL POPERTY 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.

[imadns]

Thanks Carl. You provided great information.
Let me elaborate more on my situation
Property was acquired on 12/27/2012, and is a condo in a building with a rental agency on property. It was being rented since. As it wasn't renting as frequently as I wanted. Was told the reason is its current condition and decided to renovate the property. Things done are:
1) Renovated the kitchen with new appliances and washer and dryer.
2) Removed old carpet and tile. Installed new tile for the whole property
3) 3 new TV's
4) New furniture for living, dining and guest bedroom
5) New light fixtures throughout.
6) Rewiring to accommodate new light fixtures
7) Wall art and other decorative items
😎 Painted the whole condo.

I am not sure what items can be depreciated and how to enter them in Turbo Tax. According to tax laws I read, some items are depreciated over 5 years and others over 27.5 years. Can you provide additional help?

Thanks

[Carl]

Was all of this work done in one shot, between renters?

[Carl]

Some other things I just realized I need clarification on too. For each of your items numbered 1 thru 8, can you provide documentation showing your total cost for completing each item individually, which would include labor costs for those items where paid labor was involved? (such as items 5, 6 and 8 just as an example) I'm NOT asking you to provide that information in this forum. I'm just asking if you *can*.

[Carl]

Also, for those 8 items, which ones cost you "less" than $2,500? I am assuming this property is not in CA and that you are not required to file a CA return for tax year 2015.

[imadns]

Thanks again Carl,
Yes all of this work was done in one shot. It started in Late August and finished mid December.
I do have receipts for all materials, appliances, and furniture bought and labor was itemized by the contractor for each part of the renovation. Kitchen cabinets work, appliances installation, electrician, etc. In short yes I can show labor and material cost for each item.

This property is in Florida. I am not sure how to answer the $2500. If we take items 1-8, none is below $2500, but among furniture for example, if we take one sofa by itself, then it is less. I tried to categorize them into general items.

Thanks again

[imadns]

Of note some Light fixtures are ceiling and wall lights and some are table top lamps.
Thanks

[Carl]

Keep in mind that the more individual items you have in the Assets/Deprecation section, the more PITA it is when you convert, sell or otherwise dispose of the property in the future. You'll want to group as much as you can. Here's how I would do it.
Items 2, 5, 6 and 8 I would group under one entry and call it something akin to "Electrical/Structural Modernization" Then enter the total cost (including labor) of all those items. I would also include in this entry the cost of the kitchen renovation, minus the cost of each individual appliance. (But DO include the costs of the new cabinets and the dishwasher, since those are essentially "built in".
Since it appears that you lease this out as a furnished property, I would then group all appliances together (since that's a 5-year depreciation item) and enter those as something like "new appliances".   This "can" be an issue if during the 5-year period you have to replace one of those appliances. While it can be a pain to deal with, it's doable and for me would be a risk I'd be willing to take on *new* appliances over the next 5 years. Appliances is basically anything that runs on electricity - washer, driver, range, microwave, water heater, garbage disposal, over-range exhaust, etc.
Next I'd group items 3, 4 and 7, label it as "new furnishings" and set it up to depreciate just like the appliances. The only reason I'm separating the furniture and the appliaces, is because it's easier for a tenant to steal or destroy furniture (and more likely) than it is an appliance.
Note also that by default, the TT program will set up your furniture and appliances to depreciate over 7 years and not 5. That's because you're required to use the MACRS GDS method, unless there is a law that specifically requires you to use the ADS method. For reference on this see IRS Publication 527 at <a rel="nofollow" target="_blank" href="https://www.irs.gov/publications/p527/ch02.html#en_US_2015_publink1000219071">https://www.irs.gov/pu...> and check out what it says under "Depreciation Systems". Being that the property is in FL, I'm not aware of any law requiring ADS for your situation.
Let me know how this works for you and please keep in mind that my above is just "how I would do  it". So you don't have to follow my method either. (I've 3 rentals in FL myself)

[Carl]

@drcjarmon I see you "voted up" this. If your rental is in CA "and" you're applying this to a CA return, please let me know. It matters for the 2015 CA state return only.

[Grimes_MG]

Can you elaborate on someone doing a 2018 CA return with similar circumstances (a rental property that they've remodeled)?

Thanks,

MG