I recently began renting the basement of my house and made some improvements (added a kitchen and appliances) in order to do so. I'd like to use the Safe Harbor for Small Taxpayers to deduct these expenses instead of capitalizing them.

First, any general rules for doing so I might not know about?

Second, I've read the max that can be deducted under the safe harbor is $10k or 2 percent of an eligible building, whichever is smaller. How do you calculate the 2 percent here, since the basement is part of the building and some of the improvements were to whole-house systems?

Thank you!