First time landlord taxes when remodel spans into next tax year...

Milwaukee, Wisconsin
General Landlording & Rental Properties
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First time landlord taxes when remodel spans into next tax year...

Mark Winney
Member since 2023 · 3 posts · 0 votes

Hi,

A little background.  We bought our neighbors house on June 1st 2022 with the intention of renting it.  It has taken over a year (15 months) of remodeling work to get the property to a rentable state.  Complete kitchen and bathroom tear out and replacement.  We put it up for rent mid July 2023 and have a tenant moving in 1st Sept 2023.

When it comes to taxes for for 2023 is it possible to somehow also deduct for expenditures made from June 1st 2022 to end of year.  When we did our taxes for 2022 last year we did not deduct anything other than the property taxes and purchase fees.  Would we have been a business at that point when we had not even put it up for rent till the following year?

Hope this makes sense.

Mark

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David M.
Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
3y

@Mark Winney

consult a qualified professional...

your expenses prior to putting the property into service (i.e. as a rental) goes towards your cost basis.  So you don't really expense them anyway.  Since its part of your cost basis, it really becomes part of your depreciation schedule.

After you put the preoprty into service as a rental, mainly once you list it, then your expenses generally are listed on SchE...

Hope that helps.  Happy to chat if you'd like.  Good luck.

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  • David M.
    Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
    3y

    @Mark Winney

    consult a qualified professional...

    your expenses prior to putting the property into service (i.e. as a rental) goes towards your cost basis.  So you don't really expense them anyway.  Since its part of your cost basis, it really becomes part of your depreciation schedule.

    After you put the preoprty into service as a rental, mainly once you list it, then your expenses generally are listed on SchE...

    Hope that helps.  Happy to chat if you'd like.  Good luck.

    1Reply
  • Joseph PalmieroBusiness Member
    CPA · PA · Member since 2023 · 151 posts · 115 votes
    3y

    You can depreciate the entire remodel over 27.5 years starting in July 2023 which is the month that you placed the rental into service. Appliances, carpet, and land improvements will be eligible for bonus depreciation in 2023.

    [email protected]814-720-2493
    Palmiero CPA, LLC51 Review
    WebsiteView Page
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  • Mark Winney
    OP
    Member since 2023 · 3 posts · 0 votes
    3y

    Thanks for the information.  Looks like I will be trying to figure out my cost basis from my pile of receipts....and getting a CPA

    Mark

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  • Julio GonzalezPro Member
    Specialist · West Palm Beach, FL · Member since 2008 · 4k+ posts · 1k+ votes
    3y

    Do you have a CPA that specializes in real estate taxation? Real estate has so many tax benefits and credits available, that I always tell people it's crucial to have a CPA that's extremely knowledgeable in this area. This would be an excellent question for them. I have worked with a number of great CPAs over the years and would be more than happy to provide you with recommendations if you'd like?

    561-253-6640
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