Question

Deduct prior years major improvements when sell rental house ?

Forum|Forum|6 years ago
March 4, 2020
2 replies
0 views

Is it possible to somehow deduct, for 2019 return, the cost of major remodel improvements done in 2010, when the single family dwelling rental property was purchased; and was sold in 2019 ?

And if so, how to do it with TT 'Home & Biz 2019' ?

Thank you.

TurboTax Home & Biz Windows

GiseleD

If this house was a rental property when the improvements were made, then no. The cost of major improvements would need to be reported in the year in which they occurred and depreciated over time. If you didn't depreciate these improvements and they didn't qualify for immediate expensing, you have some work to do based on the missed depreciation (I'm assuming that the house was a rental property from 2010-2019). You can only amend a return back one year to account for missed depreciation. Otherwise, you will need to use Form 3115 to obtain the IRS's consent to claim the missed depreciation. This can be a very involved process, and you may need to contact a local tax pro to help you with the missed depreciation.

Not filing Form 3115 and just eschewing the missed depreciation is not a good option, either. Depreciation allowed or allowable will be recaptured; that means that even if you didn't take the depreciation deductions, you may still be taxed on them in the form of depreciation recapture when you report the sale.

If this house was NOT a rental property when the improvements were made and you later converted it to rental use, then you ideally would have already added the cost of the improvements to the cost basis of the home. If you didn't, please see above about Form 3115.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

A

akm11Author

Thank you for the info !

Followup questions:

1 - Could we just add the 2010 improvements cost to the 2019 'Business Income and Expenses'/'Sales of Business or Rental Property'/'Cost of Property (or Tax Basis) Plus Expenses of Sale' number ? Btw, the house was not a rental when the 2010 improvements were made, but unfortunately we didnt add to the cost basis.

2 - Would we have the same problem for a future sale of our primary residence home with major improvements done in 2008 & 2012 ?

3 - Couldnt figure out how to delete (for start over) the entry at 'Sale of Business Property' 2019 entry at the 'Business Income and Expenses' list, so went to 'Schedule D' and deleted. That seemed to work, but is that the only way to do 'delete' that entry after all has been entered and saved.

Thanks again !

ColeenD3

When the property was orignally placed in service, did you properly choose the lower of FMV or basis to depreciate it? It may not be an issue of the FMV was chosen.

D

dyeargin1

We added 2 garages and had driveway and turnaround concreted while we lived in this house. When we moved, we started renting the house. Now we have sold it and were wondering if we could somehow claim the garages and turnaround in with the cost of the house.