Personal Residence Renovation

Forum|Forum|5 years ago
April 2, 2021
2 replies
1 view

Hello,
I am renovating a property that I plan to personally move into once renovations are complete in May 2021. If I then move out of this property 1 year later and rent the house out, can the renovation costs incurred in previous years then be expensed/depreciated starting with the tax year in which the property was put up for rent? Any clarity you can provide would be much appreciated!

Mike9241

Level 15

the renovations would increase your tax basis. when you convert to rental for tax purposes the depreciable basis is the lower of Fair Market Value on the date of conversion or cost. so if the cost, including renovations, is greater than FMV you will be able to depreciate them. they can not be expensed. also, the depreciable value must be reduced by the portion allocable to land.

Mike9241

Carl

Level 11

Renovations, which are usually classified as property improvements, add to the cost-basis of the property. You won't deal with this until the tax year you convert the property to a rental, or you sell it. So keep all your receipts and other paperwork pertaining to this.