I purchased a rental property in October 2023 and I completed $20,000 of rennovations which should be addded to the basis. Should I just add $20,000 to the "improvement value" areas (which is right below the land value"? In other words, if the structure portion of the purchase is $400,000, should I just put $420,000?
.. or should I list that $20,000 of rennovation under "assets and depreciation" to be depreciated seperately?
Thank you.
It depends. If the rental activity began after the renovations you should add them together as part of the cost of the rental property ($420,000 in your example).
If the rental activity began before the renovations you can add them as a separate asset.
Thanks Diane for the super quick response. The home was available for rent before the rennovations but it did not get rented until 3 months after due to slow rental market. I was basically rennovating until someone rented it out.
Also, I noticed that at a $400,000 improvement value for the structure, TT indicates the home will be depreciated by $491,789 over 27.5 years. However, at 420,000 improvement value, TT indicates the home will be depreciated by $496,223 over 27.5 years. Why does $20,000 added rennovation only equal $4,434 added depreciation over 27.5 years?
Thank you again.