Add the renovations as an asset. During the interview, you will be asked if you want to spread the depreciation over time, or take the amount all at once under the de minimis election.
To report your rental assets please follow these steps:
- Click on Federal > Wages & Income [In TurboTax Self-Employed: Business > Continue > I'll choose what to work on.]
- In the Rental Properties and Royalties section click on the Start/Revisit box.
- On the Income from Rentals or Royalty Property You Own screen click Yes.
- If you have already started adding information about your rental, you will come to the Rental and Royalty Summary screen. Click on the Edit box next to the property.
- If you have not already entered information about your rental, continue through the screens until you reach Review Your [property address] Rental Summary.
- Click on the Start/Update box next to Assets/Depreciation.
- If you have already entered assets, you will be asked the question Do you want to go directly to your asset summary? Mark the Yes button and click Continue.
- You will be brought to the Your Property Assets screen. To enter another asset, click on the Add an Asset link. [You can also Edit and Delete assets you have entered.]
- If you have not yet entered any assets you will see the Depreciation for Your Rental Property screen, click the Yes button and then click Continue.
- The next 2 screens will ask you if you bought any items for the rental property that cost $2,500 or less and whether you made improvements to the property in 2019. This relates to the de minimis Safe Harbor election that lets you take these costs as expenses instead of depreciating them.
- On the screen, Let's see if you can deduct these items as expenses, answer No to the question about taking the de minimis election,
- After the election screens, you will come to Describe This Asset. Mark the button Rental Real Estate Property and click Continue.
- Continue through the screens, entering the requested information.
Property improvements are entered in the Assets/Deprecation section. More than likely all of your improvements will be classified as Residential Rental Real Estate and depreciated over time. De-minimus is usually not an option for a property improvement that becomes "A PHYSICAL PART OF" the property. Though there are rare exceptions. (No, a new hot water heater is not an exception.)