backyard patio / side walk increase cost basis?

Question

I planning to have backyard installed in new construction SFH.

I read this cannot be added to the cost basis of the rental property and be depreciated by 27.5 years since it is not an improvement to the property.

But what about paving the patio and side of the garage, where it is touching the house.    There was an example about plants near the foundation as depreciable.

Would this count as improvement to increase cost basis (as improvement)?    I have read both yes or no.

Thanks

Sean O'Keefe · Answer

@Jeremy H. not sure where you are doing your research - there's a lot of misinformation online.

Short answer: Yes, the improvements that you make to your backyard do increase your tax basis rental property, but not all of the expenses can be depreciated.

Here's how it works in a nutshell according to IRS Pub 946.

• Consider depreciating rental property costs that may last > 1 year and aren’t eligible for De Minimus Safe Harbor (more on DMSH at a later time).
• You cannot depreciate the cost of land because land does not wear out, become obsolete, or get used up. The cost of land generally includes the cost of clearing, grading, planting, and landscaping.
• Land preparation costs, such as landscaping are depreciable
• Certain improvements made directly to land or added to it (such as shrubbery, fences, roads, sidewalks, and bridges) are generally depreciated over 15 years
• Keep in mind that depreciable rental property costs with a useful life of 20 year or less may be eligible for bonus depreciation.

I don’t think the sources that you found are accurate since some of the improvements you mentioned can be depreciated and over a shorter period of time.

You can spend more time reviewing the details in IRS Pub 946, How To Depreciate Property.

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