Window/ landscape cost for new rental house as capital improvement Or I hold it and add it as base cost of house when I sell years later?

[maggie_qu]

Hello , I bought a new house and before I rent it out I spend $6500 for window and after rent out I  $70k for new yard landscape( include install retainwall concrete, BBQ etc..) .  Now I need file my tax return,  Should I report this cost 76500$ as capital improvement to get depreciation tax befinet ( deduct  for 27.5 years but you will add it back to pat tax when you sell house later).  Or can I hold it and add it  as base cost of house price when I decide to sell  years later?  

[DDollar]

You need to capitalize them, and depreciate them.  The depreciation recapture rules apply the depreciation you were entitled to take, not the depreciation you actually took. 

[maggie_qu]

thanks for quick response, what is happen if I sell it next year, can I used rest of no depreciated ( for example 60k)  as bas cost when I sell the house ?

[DDollar]

Yes, you will just allocate a portion of the proceeds to the all items capitalized for the rental.  I allocate the remaining cost basis to all assets except the house structure, so all other assets (including land) have a gain/loss of zero and any gain or loss is on the house.

[maggie_qu]

sorry I didn't get what you say, could you please explain it more detail ? for example, I spend $70k for new house landscape at 2018, I add it to capital improvement depreciation, this year if i use  $3000 as depreciation loss, next year another $3000, 2 year later, I decide to sell the house,  the rest of ( 70k - 6k)  = 6.4k , can I add rest of 64k to my house base price cost when I sell it to reduce capital gain ?

[DDollar]

When you have "land improvements"  as an asset, when you dispose of (sel)l the house you will also need to dispose of the land improvements.  So if you sell the house for $375,000 you allocate $64,000 of proceeds to the land improvements with a gain/loss of zero.  You would also allocate a portion to the land itself, and the rest to the house, if those were the only three capital assets associated with the rental property.

You also have the option of using the new bonus depreciation and depreciating it all in 2018.  

Landscaping, however, is defined as trees, shrubbery, sod, plantings, grading, and landscape architect fees. What’s the difference? Landscaping is said not to have a useful life of its own, so it’s not depreciated as a land improvement.  It is added to the cost basis of your land.