Rental Depreciation - years after expense

Forum|Forum|3 years ago
April 10, 2023
2 replies
34 views

If I lived in my home in 2020, made a backyard upgrade in 2020 but turned my home into a full time rental in 2022 can I add the 2020 upgrade as depreciation asset on Schedule E?

Date place in service would be 2020 but reported in 2022 (first year as a rental).

This topic has been closed for replies.

Best answer by TaxGuyBill

So if the Land Improvement was done in 2020 and property became a rental in 2022 (personal residence before 2022) can I depreciate the Land Improvement?

Date acquired would be x/x/2020??

Date placed in service would be x/x/2022?

Yes, yes, and yes.

P

parvitstaxAuthor

Level 6

This posting suggests adding improvements done in prior years to placing the property in service to the building's cost basis. Is this the correct approach? This would depreciate over 27.5 years vs 15 years for land improvements. So it seems that would be the incorrect approach.

T

TaxGuyBill

Level 15

It would help if you explain exactly what "backyard upgrade" actually means.

P

parvitstaxAuthor

Level 6

Backyard upgrade = Landscaping

T

TaxGuyBill

Level 15

Depending on what you mean by "landscaping", it might not be depreciable at all.

At any rate, when the property becomes available for rent, EACH asset is "placed in service" on that date, using the LOWER of (a) Adjusted Basis or (b) Fair Market Value.

As you pointed out, prior improvement to the home are already included in that "asset's" Basis. But you depreciate each asset separately. So separate items, like Land Improvements, Appliances, Furniture, etc. would all be depreciated separately.

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