Sale of rentals

Forum|Forum|3 years ago
March 2, 2023
1 reply
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I sold three rentals properties that I refurbished, these homes needed complete renovations. I replaced windows, doors, HVAC system, appliances, siding, roofing, decks, driveways, hot water tank, flooring and I remodel kitchen, bathroom, bedroom, paint entire house. Where do I enter these figures on the schedule E? Are these renovations considered expenses or assets?

HelenC12

Rental renovations would have been entered in the asset section of your rental and depreciated, generally starting once the improvement(s) were placed in service. They are not expenses.

To enter your renovation as a rental asset(s):

Sign into your TurboTax account.
Select Pick up where I left off or Continue.
Select Federal then Wages & Income from the left side menu.
On the Wages and income screen, scroll down to Rental Properties and Royalties (Sch E) and Edit/Add.
If you get to the Your 2022 rentals and royalties summary screen, Edit the property.
On the Here's XXX rental property info screen, scroll down to Assets and to the right of Improvements, furnishings, and other assets, select Edit.
On the Your improvements, furnishings, and other assets screen, select Add Asset.
On the Your Property Assets screen, scroll down and select +Add an Asset.
On the Describe This Asset screen. select Rental Real Estate Property and Continue.
On the Tell Us About This Rental Asset screen, select Residential Rental Real Estate and Continue.
On the Tell Us a Little More About Your Rental Asset screen, click the radio circle next to Residential Rental Real Estate and Continue.
Enter the renovation information and Continue with the onscreen interview until complete.

Note: Per IRS Pub 527, page 9, Table 2-1: Additions and improvements, such as a new roof, have the same recovery period as that of the property to which the addition or improvement is made, determined as if the property were placed in service at the same time as the addition or improvement.

According to the IRS 2022 Publication 527, page 8, Additions or improvements: Add to the basis of your property the amount an addition or improvement actually costs you, including any amount you borrowed to make the addition or improvement. This includes all direct costs, such as material and labor, but doesn’t include your own labor. It also includes all expenses related to the addition or improvement.

Keep separate accounts for depreciable additions or improvements made after you place the property in service in your rental activity. For information on depreciating additions or improvements, see Additions or improvements to property, later in this chapter, under Recovery Periods Under GDS.

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