I have a rental property, and I spent about $25000 to repair and remodel it, can I deduct this expense from my rental income, and how?

[IsabellaG]

The expenses to remodel your rental property should be capitalized and depreciated rather than deducted all at once. 

If  this was the first year that you rented the property, and you remodeled the property before you made it available for rent, you will include the cost when you first enter the rental into TurboTax. After you enter your purchase price, you will see a screen: Any Property Improvements Made? and you would enter the cost there (see the screenshot).

If the improvements were made later, you can add the cost in the Depreciation section (see screenshot).

 If your improvements qualify, you may be able to claim them as an expense rather than depreciate them, and TurboTax will ask you about them on the screen "Let's see if you qualify to claim these improvements as expenses." (see screenshot). 

There is a difference between expenses that are considered capital improvements to your property and those that are considered repairs, which you can deduct in the year that you pay them. Please see IRS Publication 946 , especially page 13, for more information. https://www.irs.gov/pub/irs-pdf/p946.pdf

Edit 02/04/16

[jsun365]

thanks. the screen asked me:Did you buy any items that each cost $2,500 or less in 2015? what's that mean?  I  replaced new furnace cooling system, new windows, new kitchen counters,etc everything each over @2500, shall I answer NO? Thank you

[IsabellaG]

What you describe is not "items" that you purchased. Instead you made improvements to your property. The $2500 amount refers to "tangible personal property" like a car, furniture, etc. Your improvement were for real property (real estate) and so you should answer "no" to this question, except if you purchased anything that qualifies.

[xia533]

I can not find the page Any Property Improvements Made?

[IsabellaG]

In TurboTax Premier, go to Federal Taxes>Wages and Income>Rental Properties and Royalties. Then answer the Rental questions (again) until you arrive at the Rental Summary.

Find your property, and choose EDIT. As you go through more questions about the property, including the purchase price, you will reach the page "Any Property Improvements Made?"

But remember, that's only if you remodeled the property before you placed it in service as a rental. If  this isn't your first year, and you made the improvements later, use the Depreciation section in the screenshot shown above. If your improvements qualify, you may be able to claim them as an expense rather than depreciate them, and TurboTax will ask you about them on the screen "Let's see if you qualify to claim these improvements as expenses." See the screenshot in my answer, which I have edited above.

[jmac88]

To add a question on to this thread...

If I personally do the remodel to my rental property (no contractors), I can still depreciate the improvements?

[LindaB1993]

Although you did not incur contractor costs, your capital improvement cost includes all the materials, supplies and tools needed for the project.  You are entitled to the depreciate the costs incurred.  You do not get credit for your "labor".

Capital improvements are business expenses incurred that  have a useful life of more than one year, such as roof replacement. Because the improvement is considered a capital asset, you must recover the cost of the item by depreciating the expense over the item’s useful life.  Each tax filing year, you will include a depreciation expense amount for the capital improvement until the point at which you have recovered the entire cost of the item on your federal income tax return.

[fmontano76]

what if you have not rented the house but want to do that after the remodel or if you decide to sell the house once you sell it then the cost for the remodel are recorded after you sell it?

[ColeenD3]

@fmontano76

You can't deduct the remodel. This is true if you are renting, not renting or trying to sell the property.

It has to be depreciated if it is rental property or added to the basis for personal use property. 

[fmontano76]

can you tell me what the bases for personal use property is if i understand right this would be property that i have that i can have my kids use and depreciate that property?

[JamesG1]

Examples of personal use property are a home, a car and household furnishings.  See this IRS publication.

If the property has a business use, the property can be depreciated on your self-employment or rental tax return.

The basis of an asset is generally the cost of the asset but an adjusted basis would include the cost of improvements less any depreciation taken.   

[CraftJM81]

Hello, 

My husband and I also did approximately $25k in renovations between May-Aug 2019 then listed the property for rent in Sept 2019.  Are these expenses able to be deducted as improvement with depreciation even though they were done prior to listing the property for rent?

Thank you!

[DianeC958]

Yes, you can list improvements that were done to the property and depreciate them, even though the improvements were done before the property was listed to be rented.

Real Estate Tax and Rental Property

@CraftJM81

[CraftJM81]

Thanks for the quick reply. Is there a cap to the amount you can list?