Are earthquake retrofit expenses for a single family home deductible in the year paid, or capitalized and depreciated?

[bwa]

Are you asking about federal or CA taxes?

[QUEST5]

Both

[Hal_Al · Accepted solution]

If it is your residence, it is not deductible. It is also not depreciated . The cost is added to your cost basis, for when the property is sold in the future.

If it's a house you rent out, the cost is depreciated, not expensed (deducted). But there are two exceptions:

1.  If the total cost was less than $2500

2. the cost plus all your other expenses, for the year, was less than $10,000 and less than 2% of the depreciable basis of the existing structure.

Reference: https://www.biggerpockets.com/blogs/6032/41669-understanding-the-safe-harbor-rules-and-keeping-money...

[QUEST5]

If the cost is added to my rental property basis, would it be depreciated over 27.5 years?  some shorter period?

[Hal_Al]

You would enter the retrofit as a new asset and depreciate over 27-1/2 years.
It would only be added to your main building cost basis in your own records, not on the tax depreciation schedule.

[daveneedsanswers]

If an earthquake brace/bolt retrofit cost $15,000 and I received a $10,000 non-taxable/non-reportable FEMA grant, would my cost basis be the net cost to me $5,000 or does the entire $15,000 (the full value of the retrofit project) go to the cost basis?

I paid all the expense out of pocket, and was partially reimbursed with non-reportable FEMA grant money that is also tax exempt in California...

(I know the answer seems obvious, but I'd like to hear other opinions! thanks.)

[AbrahamT]

   A earthquake brace/ bolt retrofit would most likely be considered a capital home improvement. Thus, it would be added to the cost basis of your home. Because you were reimbursed 10K of the total 15K , then obviously your net cost of 5,000  is

the amount to your cost  calculation purposes in figuring out your new cost basis when you decide to sell your house down the road. See HERE.