Rental improvements split in two years - cash basi

[regina_ranoa]

I decided to install hardwood floor on a rental property (private room rental airbnb).  The hardwood floor materials was purchased in 2021 (to take care of holiday end of year financing offer). Materials were in storage since actual labor work for this improvement was not done till Feb 2022, and improvement not put in place in 2022.  I am a cash basis taxpayer - materials paid via credit card on dec 31, 2021. The amount of the hardwood work allocable to business property (private room sq footage/total sq footage of the hardwood work done) is $400 for 2021.  The total labor allocable to the business/rental use (paid in 2022) was $750.  How is the tax treatment for 2021 and 2022?  Expensed out as two individual components - material cost for 2021 and labor work for 2022? Or is it depreciated - $400 in 2021 and $750 for 2022? Or some other way?  I know it was simpler to have done everything in one year. 

[ColeenD3 · Accepted solution]

Since it was not placed in service until 2022, include the amount for depreciation on your 2022 return.