Rental Depreciation

[jrraa]

I am a first time renter.  I rented out a bedroom, bathroom and a living space starting September 1, 2022.  The living space was plumbed, but did not have a kitchenette in it at the time of occupancy.  The person renting the space used a toaster oven, a small microwave, etc. to cook meals and the bathroom for dishes.

I started work on a kitchenette in that area.  I have expenses related to the kitchenette-appliances, cupboards, and others which I have receipts for.  Theses expenses occurred in 2022.  The kitchenette was not useable until 2023.  I had some expenses in 2023 also.

How do I handle these expenses? Am I allowed to deduct anything for 2022 or must be done it 2023.  If done in 2023, can I deduct all of the expenses for the kitchenette, even those occurring in 2023.

Thanks for your help.

[Vanessa A]

Adding a kitchenette would be an improvement that will be depreciated over its useful life, not an expense.  When you do this on your 2023 return, you will add it as a new asset.  This will be depreciated over 27.5 years.  Since it was not placed in service until 2023, you would not be able to deduct it in 2022 even though you paid for it in 2022. 

[jrraa]

Thanks for your quick response. And I can enter both 2022 and 2023 expenses the kitchenette on my 2023 return?

[DawnC]

Yes, the total cost of the improvement will be listed as one asset.   Since the asset was placed in service in 2023, that is the year you will begin depreciating the asset.   So, you are not going to enter 2022 expenses next year, but the cost of the asset you add in 2023 will include those amounts spent in 2022.