Capital Improvements vs Maintenance and Repairs

[Jeff V.]

I'm finishing up a Buy, Fix and Hold deal and about to put the property in service as a rental.  This question is for anyone with bookeeping/CPA experience.  I'm sure it's a basic task, just one that I've never done and not sure how to do at this point.

During the Rehab I've been recording the "Expenses" as Labor, Materials, Equipment Rental ect. to keep track of everything.

Now that the property is going in service I'm thinking that on the books those expenses should be re-categorized over to show an increase in value (basis) of the property in order to capitalize and depreciate the asset.

The problem I'm having is not sure how to do this and can't find any good references for doing this with Google searches.  I'm sure there are multiple ways to do it that will effect things later either positively or negatively.  I'm hoping to avoid the negative methods if at all possible.

So my question is, How do I re-categorize the expenses during a rehab to reflect "Capital Improvements" in the property and increase in basis?  And Is this what i should be doing?

Deal Info:

Purchase Price 20k

Rehab 65k

I hope this is enough information to answer my question.  Any help will be greatly appreciated.

I will have all of this looked over in June/July time frame but just wanted to straighten up my books a bit before checkup so they are more accurate.