Recording Costs to Build New Construction for ADU

In 2023, I spent about $225K for construction, permits, and blueprints. Need help on how and where to include on my tax return.

Permits and Construction started 1/2023 & 2/2023.
Available to occupy was 5/2023.
ADU (Rental Unit) built above garage and on same property as Primary Address (which I live in).
ADU is detached and has separate address and separate metered utilities then Primary house.

I think this is pretty straight forward, just need peace of mind that I am recording it correctly on incomes taxes.

TJMADU-2023

4170

Employee Tax Expert

Apr 22, 2024 6:46:30 AM

This activity would be reported as a Rental Property and the cost to build the ADU would be recorded as the main asset for depreciation. If there is a possibility of the ADU being sold separately from the primary residence, then you should plat and allocate the land under the ADU to the rental property as well. (Land is not depreciated but does increase your basis in the property a whole.)

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Recording Costs to Build New Construction for ADU