Property is an asset that must be depreciated over time. This includes real property (real estate) as well as tangible personal property with an expected lifetime of more than one year, such as appliances and furniture. Most expenses connected with the purchase of property (i.e. closing costs, delivery, installation) are added to the cost basis of the property and included in the depreciation calculation. If you make permanent improvements that are attached to the real property (like built-in appliances, water heater, air conditioning etc.) before the property is placed in service as a rental, they are also added to the cost basis for purposes of depreciation. If permanent improvements are made after the property is placed in service, they are listed as individual assets and depreciated separately.
True expenses include most things that are not assets, such as Landscaping, Painting, cleaning, maintenance, minor repairs, property taxes, utilities, and insurance. You may deduct rental expenses on schedule E beginning when the property is placed in service as a rental. That means, when you advertise and list it as being available for rental.
There is a special rule that allows you to deduct improvements and assets under $2500 as expenses rather than having to list them separately for purposes of depreciation. This is something that would apply after the property is rented out, and I don’t think it applies before. For example, if you purchase the property and change all of the locks, that’s a property improvement which is added to the cost basis of the property for depreciation purposes, because it is an improvement that has an expected lifetime of more than one year. However, if you have to change the locks again after a couple of years, that would technically be considered an asset because the locks have an expected lifetime of more than one year. But since the cost is less than $2500, you would be allowed to treat it as an expense. Or suppose a drunk tenant kicks down a door. If you can repair the door, the repair is an expense. If you have to completely replace the door, that would be considered property and an asset, but you can treat it as an expense if it costs less than $2500.
There are probably some good tax guides on owning and managing rental property that cover the income tax implications. You may want to educate yourself with a good book, assuming you don’t want to pay for an accountant to educate you.
