Rental property improvement

[mprabs]

Hello,

I had started on an improvement project (ADU build) for my rental property in 2022. However this work was not completed in 2022 and spilled over into 2023. Do I report and start taking depreciation of the amount paid for the work in 2022 or do I wait till the work is completed and claim the entire expense (paid in 2022 and 2023) for depreciation purposes?

Thanks in advance.

[JamesG1]

IRS Publication 527 states

When Does Depreciation Begin and End?

You begin to depreciate your rental property when you place it in service for the production of income.

Through December 31, 2022, you have accumulated construction costs that will be added to your 2023 construction costs.  The total of those construction costs will become the new rental property asset.  You will begin to depreciate the new asset when you begin using the new asset for business purposes.

@mprabs 

[SeptemberC]

Mprabs good afternoon, IRS Publication 527 will help you with that.  But it's the year you begin to make money.  Since your construction is not finished yet I would assume you will claim these on 2023 taxes

Link to publication - https://www.irs.gov/publications/p527