Depreciation vs. expensing for Residential Rental

Forum|Forum|1 year ago
February 13, 2025
1 reply
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My long-time tenant moved out in January, 2024. I went in and gutted the carpeting & replaced with hardwood floors/replaced several windows/replaced sink/replaced fireplace insert/replaced hot water heater/and of course repainted and cleaned and cleaned and cleaned. I did all the work myself. The receipts total about $12,000. I don't know whether to expense it all, or to depreciate all/some of it. I appreciate your help on this!

KrisD15

Items costing 2,500 or less can be expensed. The flooring would be considered a capital improvement, be listed as an asset, and depreciated. Your time cannot be charged.

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garycarolsAuthor

Thank you--that helps a lot. Regarding the flooring, the total cost was well under the $2500 limit that can be expensed . . . so can the flooring be expensed as well? Again, thank you.

mglauner

Any improvements or repairs done while the property was not a rental would not be considered 'Rental Expenses'.

What you can do is add all you spent to improve the property before renting it again, to the Cost Basis you use when renting the property again (or to the Cost Basis when you sell the property). This will increase the Depreciation you get each year (if you rent again), or decrease the Capital Gain (if you sell the property).

For example, if your property was worth 100K and you spent 12K fixing it up, it is now worth 112K, whatever you do with it next.

In TurboTax, you would indicate that you returned the rental property to Personal Use in January 2024 (give date renter moved out). You would still claim Property Tax, Mortgage Interest, and any expenses for the month of January prior to that date.

@garycarols