Please see this thread for my earlier questions on selling this rental.
https://ttlc.intuit.com/community/taxes/discussion/sale-of-rental-house-in-other-state-[product key ...
The house was purchased late 2006. In February 2007, before it was rented for the first time, the house was flooded due to a frozen/burst pipe. This damage required replacement of carpet, flooring, appliances, cabinets, drywall, ceilings, etc. I opted at this time to upgrade an otherwise basic rental unit with premium carpet, flooring, and appliances. At the same time I decided to have an unfinished room finished, which included adding a window, carpet, drywall, electrical, heating vent, telephone line, etc. The cost of the addition was not separated from the repair costs, nor were estimates made which would point to additional value due to the upgrades. Total cost of the work was $25,000. This figure does not include extra costs related to the flood but not associated with improving the property, such as demolition, trash hauling, additional utility charges (80,000 gallons of water, etc.)
I've read here (
https://learn.roofstock.com/blog/how-much-tax-when-you-sell-rental-property) that costs associated with improvements, such as a room addition, or repairs needed to bring a rental house back to a habitable condition can be used to "increase the basis" of the property, which would in effect increase the purchase value, and thus decrease the net capital gains. Can you confirm that these expenses can indeed be used to increase the basis, and if so, where are they entered in the software?
And if any of these costs were reimbursed by insurance, would that affect this?
Thank you.
