Question

Capital Improvement in years prior to start of rental

Forum|Forum|3 years ago
April 10, 2023
1 reply
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I purchased a condo in 2017 and replaced the carpet with vinyl flooring for around $3500. I started using it as a rental in 2020 midyear. In July of 2022 the unit was sold. Can I consider the flooring replacement as a capital improvement to increase the original cost basis of the rental unit and enter it on my 2022 tax return without amending prior year tax returns for 2020 & 2021? Or should I just forget about the flooring improvement?

PatriciaV

Employee

How did you value the property to set up the basis for depreciation when you first started renting it? Did you include the cost of the new flooring in that value? If so, then that it's already included in your rental property basis.

However, if you didn't report it as part of the basis in the beginning and never added it as an improvement, you can't include it in the sale transaction now. You'd have to amend all years that you reported the rental to recalculate depreciation for the property using the increased basis.

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