I spent $24K on August 2016 to remodel a rental house. Examples - painting inside & outside $7200; new carpet $3400; new counter tops in every bathroom $4400; new garage door $1100; new appliances $1200; etc
Here are my 2 questions - For 2016 tax return, can I combine all those improvements as one item in Turbo Tax - "major improvement" with 27.5 yrs (because of new counter tops). Or, IRS or Turbo Tax require me to report each improvement separately with separate depreciation years (gosh, I hate to think about how many 4562 depreciation forms I will have). Frankly, I do not mind taking slower depreciation (27.5 yrs) if I can combine all the improvements together with ONE 4562 form!
My 2nd question is - I may or may not sell this rental house in 2017. If I sell the house before August 2017 (less than one year after I made all these improvements), does it mean I can continue to depreciate these improvements up to August 2017. I think Form 4797 will recapture these depreciated amounts as ordinary income, not getting capital gain treatment.
Thank you in advance for your answers.
Q1) Yes, the IRS considers this all to be components of one major improvement.
Q2) Yes, you can depreciate up until the date of sale and the depreciation will be recaptured as ordinary income.
Thank you, TurboTaxColeen, for speedy answer. Based on your ans, I will lump all the improvements as ONE improvement. A follow up to your answer to Q1 - When I lump all the improvements with title "major improvement" & I am willing to settle for 27.5 yrs depreciation yrs, how do I answer to all those TT questions & then know, in final outcome, that TT will choose 27.5 yrs (because I installed bathroom counter tops which should use 27.5 yrs even though other improvements have shorter life such as 10 yrs, 7 yrs life etc)? I use TT for many many yrs & I had experience that sometime TT has a mind of its own & may choose 10 yrs or whatever yrs based on my answers. Thank you again.
As long as your choose "rental real estate property" and then "residential rental real estate", it will pick 27.5 years.