Can an owner fully depreciate a rental house more than once when fully renovated like new again?

[mjdolan3]

I have owned the rental home over 41 years and fully depreciated it. My renters have moved out and I have gutted the place and renovated it to modern standards (new kitchen, new bathrooms, etc). Can I start depreciating the house once again over a 27.5 year period?

[PeterM · Accepted solution]

No, you won't depreciate the house again. Instead you'll depreciate the cost of the improvements. The period, or length of time, to depreciate remains at 27.5 years.

An improvement is anything that enhances the value or usefulness of a property, restores it to new or like-new condition, or adapts it to a new use. The list of potential improvements is endless, but common improvements include:
• Building new additions or garages 
• Installing new systems, such as heating or air conditioning
• Replacing the roof
• Adding wall-to-wall carpeting 
• Installing accessibility upgrades, such as a wheelchair ramp Routine repairs and maintenance are not considered improvements.

Maintenance costs are deducted as expenses in the year you spend the money.

I would separate out as many costs as possible that can be classified as something other than an improvement. For example, if you put new appliances in the kitchen...you'd want to depreciate those differently from say, any sub-flooring that you may have done. In this example the sub-flooring would be depreciated over 27.5 and the appliances over 5 years...resulting in a greater deduction now.

Please see the following link for more information:

IRS Publication 527 (click here)

[mjdolan3]

Peter M....many thanks for your response. Really cleared up things for me.