Prior year construction expenses related to sale of rental property

Forum|Forum|3 years ago
February 9, 2023
1 reply
0 views

I sold a rental property in 2022 that I had owned since 2008.

In the intervening years I had performed a number of improvements which were capitalized (not deducted as repair costs). How do I post the amount of capitalized improvement and repair expenses made to this property?

TurboTax Home & Biz Windows

PatriciaV

Employee

It depends. If you have reported this rental property in TurboTax, any capital improvements should have been added as assets for depreciation for that property. In this case, when you report the sale, be sure to dispose of all assets relating to the property. You should have claimed (deducted) rental expenses in the year they were paid.

If you have not included the capitalized improvements in prior years, you will need to add them before you report the sale. The IRS expects you to depreciate assets even if you failed to report the depreciation in prior years. In other words, the basis of the asset must be reduced by the full amount of the allowable depreciation, even if no tax benefit was realized. However, if you know the adjusted basis of the capital improvements, you may enter this directly under rental property assets.

These references may be helpful:

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