In 2024 after the last tenant finally moved out of the rental unit, we incurred general maintenance fees to clean out the property including the yard, property management fees and remodeling (including appliances, window replacements, electrical upgrade and kitchen and bathroom remodeling) material and labor expenditures. Most of the expenditures were incurred/paid in 2024 but some remaining contractor fees, etc. were paid in 2025 after passing final inspection by the city building inspection. The property was vacant during the remodeling and was not rented out until May 2025. We mostly like have a net loss in 2024.
- What expenditures can be reported as expenses in 2024 returns and what needs to be capitalized and take annual depreciation expenses. What would be the depreciable life(s) for the capitalized expenditures?
- Can we capitalized in 2024 and start taking depreciation expenses in 2024 or do we have to wait until the 2025 returns since we were not able to rent it out until May 2025? Do we treat the sum of all contractor fees and materials as 1 project and 1 asset for depreciation or do we need to have separate ones for payments in 2024 and payments in 2025, or window replacement, vs kitchen/bathroom remodeling?
