On contraire!
Because the contractor didn't itemize most costs, I don't know how to separate the repairs from the improvements for tax purposes.
Every bit of the work was done by a single contracted who presented you a final bill. The cost of the ***ENTIRE*** project is a property improvement. Period. End of Story.
- Does the cost of interior painting, which was done as part of the whole project, need to be separated out as a repair, and is there a way to do that without an itemized invoice?
No. You specifically and explicitly state that painting was done "as a part of the whole project". Take for example when you convert a 2 bedroom house into a 3 bedroom house by converting the garage into that 3rd bedroom. There is no question that the project meets the definition of a property improvement. One of the last things you're going to do on the build out is paint that new bedroom, and you may paint the rest of the house so things match with the same fresh look. You'll include the cost of painting as "a physical part of" the property improvement because it was "in fact" a physical part of the property improvement. Not an expense separate from it.
- The new flooring had to be replaced in one room after just a few months, before the property was even rented. Would I be correct in including this cost as a repair?
Not if it meets the IRS definition of a property improvement. (I would expect it to)
One thing to note here is that repair and maintenance expenses incurred before the property was "available for rent" are just flat out not deductible. Period. But don't try to go changing your in service date to make it early. There is no way on this green earth the property was "move in ready" until one day after all your "major renovations" were completed, at the earliest. That includes that new floor.
Please read "ALL" Of the below. Don't just read the property improvements definition and stop. It all matters to you - every single word.
Rental Property Dates & Numbers That Matter.
Date of Conversion - If this was your primary residence or 2nd home before, then this date is the day AFTER you moved out.
In Service Date - This is the date a renter "could" have moved in. Usually, this date is the day you put the FOR RENT sign in the front yard.
Number of days Rented - the day count for this starts from the first day a renter "could" have moved in. That should be your "in service" date if you were asked for that. Vacant periods between renters count also PROVIDED you did not live in the house for one single day during said period of vacancy.
Days of Personal Use - This number will be a big fat ZERO. Read the screen. It's asking for the number of days you lived in the property AFTER you converted it to a rental. I seriously doubt (though it is possible) that you lived in the house (or space, if renting a part of your home) as your primary residence or 2nd home, after you converted it to a rental.
Business Use Percentage. 100%. I'll put that in words so there's no doubt I didn't make a typo here. One Hundred Percent. After you converted this property or space to rental use, it was one hundred percent business use. What you used it for prior to the date of conversion doesn't count.
RENTAL PROPERTY ASSETS, MAINTENANCE/CLEANING/REPAIRS DEFINED
Property Improvement.
Property improvements are expenses you incur that add value to the property. Expenses for this are entered in the Assets/Depreciation section and depreciated over time. Property improvements can be done at any time after your initial purchase of the property. It does not matter if it was your residence or a rental at the time of the improvement. It still adds value to the property.
To be classified as a property improvement, two criteria must be met:
1) The improvement must become "a material part of" the property. For example, remodeling the bathroom, new cabinets or appliances in the kitchen. New carpet. Replacing that old Central Air unit.
2) The improvement must add "real" value to the property. In other words, when the property is appraised by a qualified, certified, licensed property appraiser, he will appraise it at a higher value, than he would have without the improvements.
Cleaning & Maintenance
Those expenses incurred to maintain the rental property and it's assets in the useable condition the property and/or asset was designed and intended for. Routine cleaning and maintenance expenses are only deductible if they are incurred while the property is classified as a rental. Cleaning and maintenance expenses incurred in the process of preparing the property for rent are not deductible.
Repair
Those expenses incurred to return the property or it's assets to the same useable condition they were in, prior to the event that caused the property or asset to be unusable. Repair expenses incurred are only deductible if incurred while the property is classified as a rental. Repair costs incurred in the process of preparing the property for rent are not deductible.
Additional clarifications: Painting a room does not qualify as a property improvement. While the paint does become “a material part of” the property, from the perspective of a property appraiser, it doesn’t add “real value” to the property.
However, when you do something like convert the garage into a 3rd bedroom for example, making a 2 bedroom house into a 3 bedroom house adds “real value”. Of course, when you convert the garage to a bedroom, you’re going to paint it. But you will include the cost of painting as a part of the property improvement – not an expense separate from it.
