renovation cost

[zhaocindy]

year 1: primary home most of time, then move out, did major renovation;

year 2: early of the year, did the rest renovation, then rent the house;

Question: which category does it belong to for the renovation cost?  and which tax year can I deduct them for both years' renovation cost?

[AnnetteB6]

The answer depends on when you placed the property in service as a rental. 

Until the property is advertised and available for rent, you do not have a rental property and therefore, you do not have rental expenses to claim.  

If you started advertising and making the property available to rent after all renovations were complete, then the cost of the renovations will be included as part of the basis for depreciation for the property.  It will not matter which year the costs were incurred, the total will be added to the basis and will be taken into account on the tax return for the year that you placed the property in service as a rental.

For example, if you started the renovations in 2021, finished in 2022, and then started advertising/renting the property, the 2022 tax return is the first year you will include a Schedule E for your rental income and expenses.