I renovated a home I leased to turn it into a vacation rental. How can I expense the renovation?

pbmunkey — Thu, 06 Jun 2019 15:43:02 GMT

I currently lease a home and have it setup as a vacation rental for others to rent. Recently, I remodeled the kitchen, 2 bathrooms, ran new copper plumbing, built a new patio, and paved a new driveway.

I capitalized each item as an asset by following the steps below:

1. Clicked on "Assets being depreciated" under "Business Assests"

2. and then "add an asset"

3. then "Intangibles, Other Property" out of the list of:

Computer, Video, Photo and Telephone Equiment
Tools, Machinery, Equipment, Furniture
Real Estate Property
Intangibles, Other Property

4. then "Land Improvements"

5. then typed in 1st Remodeled Bathroom and put in the cost and date

6. Checked the box that says "purchased this asset new" and the box that says "Yes i've always used this item 100%.."

The system gave me 50% up front and the rest to be capitalize in 15 years. Is this the correct way to do it?

How would the capitalization work if I have to return the rental in 5 years. Would I be able to capture the rest of the capitalization or forfeit the remainder?

Thank you so much for your time.

No, that is not the correct way to do it for improvements...

DianeW — Thu, 06 Jun 2019 15:43:04 GMT

No, that is not the correct way to do it for improvements in connection with renting a vacation home that you lease. The correct selection is Real Estate Property, the tangible and intangible as well as real property are described below.

Personal Property: Tangible and Intangible property other than real property

Tangible: Anything you can see, feel or touch
Intangible: Anything that carries a value, but in and of it self is worthless (ex., a dollar bill or a stock certificate)

Real Property: Land, building and building structural components

You cannot choose the DeMinimis Safe Harbor for real property improvements when you don't own the property.

You can choose to depreciate the appliances under a shorter period by using these steps. Asset page, choose Rental Real Estate Property. On the next page, Tell us a little more about your rental asset, choose Appliances, Carpet, Furniture. You may also choose the DeMinimis Safe Harbor for these expenses (see below). After you answer the qualification questions TurboTax will tell you to list these expenses under the "Miscellaneous Expenses" category. Keep accurate records until you no longer have the rental activity.

Any other capital improvements to the building, including the remodeled bathroom must be depreciated under residential real property over 27.5 years.

If you loose the leasing rights, or you no longer have the right to sublease you can deduct the remaining balance as long as it is not converted to personal use (such as any appliances).

The TurboTax article below will explain the DeMinimis Safe Harbor.

https://ttlc.intuit.com/replies/4682171

topic I renovated a home I leased to turn it into a vacation rental. How can I expense the renovation? in Investors & landlords

I renovated a home I leased to turn it into a vacation rental. How can I expense the renovation?

No, that is not the correct way to do it for improvements...