Repair Expenses on Former Home That is Now a Rental Property

[AR_VA]

Dear Turbo Tax team,

During tax year 2023, I made my former home available for rent.  I lived in the home for 20+ years and made numerous repairs and improvements through the years and prior to 2023.  I also made repairs and improvements during 2023.

1. On the “Repair” and “Improvements” screen in Turbo Tax (see first two screenshots below), am I to enter all repair and improvements that occurred only during the tax year? Or, …
2. Am I to include the costs of any repairs and improvements, such as replacing the roof, replacing the windows, installing a geothermal HVAC system, made prior to the tax year?
3. If repairs prior to 2023 should be entered, should I not go beyond a certain number of years back in history when calculating the total repairs?  In other words, if a repair was made ten years ago, should it not be listed?

There are screens that appear later in the program’s information collection process that ask about tax year-specific “Assets” and “Improvements.”  (See last four screenshots below.")

However, these screens combined with the previous screens seem confusing given the lack of context of the first screens and the lack of direction regarding how many years back one can go when listing repairs, assets and improvements.

Thank you for your assistance.  Blessings! 

[LoraineG]

Depends what you are classifying as repairs.  For example, some of the things you mention, are considered improvements.  Improvements add value to the property, for example, replacing a roof.  Let's say that you bought the house for $100k and then you replaced the roof for $10k.  That $10k gets "added" to the value of the house, so now your house, for tax purposes, costs $110k.  You have to capitalize (add) those permanent repairs or improvements.  You can claim them through depreciation when you started renting the house.

What is considered only repairs, is for example, you painted a wall.  That has to be deducted the year you incurred it, and even more than that, when the house became available for rent.  The ones you did before that time are nondeductible.

Here's some resources for you:  https://ttlc.intuit.com/turbotax-support/en-us/help-article/real-property/handle-capital-improvement...

[AR_VA]

Dear LoraineG and Turbo Tax team,

Thank you for your feedback regarding repairs vs. improvements.  Setting the need to properly classify repairs as repairs and improvements as improvements, am I only to include the repairs and improvements that occurred during the tax year?

If I can include repairs and improvements that occurred in previous years, do I include repairs and improvements since the date of purchase or, for example, do I only go back ten years?  At what point should a previous repair or improvement not be included in the calculation?

Thank you for your assistance.  Blessings!

[LoraineG]

What is classified as improvement you will add to your basis (cost of the house) independently when they occurred.  Take the example I told you before.  Let's say that the roof repair was in 2020 and you started renting in 2023.  Then the  basis of your rental, as you enter it in the system, should be $110k not $100k using the date you converted it to rental.  Anything improvement needs to be added to the cost of the house.  That is whether or not you actually started renting it.  

The repairs will be from the moment you made it available for rent.

[KarriC]

On the "What improvements did you make before renting out" you will enter the total of all improvements made since you purchased the home. To reiterate, improvements are things that increase the value of the property and don't include maintenance. You do not need to list things separately. This will ADD the cost of the improvements to your basis, increasing the basis to be depreciated.

On the "Did you buy any assets that cost $2,500 or less in 2023" you will be able to expense any improvements you made in 2023 for the rental that are less than $2,500.
If you have any improvements you made in 2023 that were more than $2,500, these items will be added as assets and depreciated along with the home and its "new" basis (original home cost plus improvements made after you bought the home and before you made it a rental).