Renovating a unit to rent out: Start-up costs, deductions, etc.
Hi folks,
I bought a unit in 2021 that I intend to rent out and have been renovating it. The rental unit is not yet "in service", but it should be later in 2022. It is going to be a long-term rental. I'd appreciate any pointers on how to treat (for taxes) the various costs I have been encountering in 2021. I'll list the major categories of costs here:
- Property taxes
- Insurance
- Mortgage interest paid
- Paid invoices to contractors for working on the renovation. This includes labor and materials.
- Costs of disposing of demolition debris (dumpster rental + haul fees).
- New appliances purchased. Estimated lifespan ~20 years.
- Networking hardware purchased to provide Internet service to the unit once rented. Estimated lifespan ~7 years.
- Utilities: Electric and water bills. Very low usage since it's vacant, but not zero costs.
- Lawn maintenance
- Travel: I had to travel to the location of the unit to check up on the project.
Some of these likely get aggregated into bigger categories, like I understand that improvements are accumulated and start depreciating over 27.5 years. I've also heard the term "start-up costs" with 15 year depreciation and $5k deduction when placed in service, although these are supposed to be for an active trade or business.
How should each of the above be treated for tax purposes in 2021?
Thank you 🙂
