Over the past 4 years I have been renovating a historic house as a vacation home/rental property. It is a distance away from where I live and I have made numerous weekend trips to work on it. I rented it for the first time this past year and want to start deducting it. I have kept good records and I assume that all repairs made to it over the years can be become part of the basis for depreciation. Can the accumulated mileage be part of this basis? Can equipment (tools, etc) I bought to renovate it and will stay with the property be included? Can past taxes, insurance, etc. also be included? Or only those of the year of rental?

Comments will be appreciated. Thanks!

Over the past 4 years I have been renovating a historic house as a vacation home/rental property. It is a distance away from where I live and I have made numerous weekend trips to work on it. I rented it for the first time this past year and want to start deducting it. I have kept good records and I assume that all repairs made to it over the years can be become part of the basis for depreciation. Can the accumulated mileage be part of this basis?======>repairs are No not part o f the basis; You must increase the basis of the property by the cost of all items properly added to a capital account.for example,The cost of any additions or improvements made before placing your property into service as a rental that have a useful life of more than 1 year. Amounts spent after a casualty to restore the damaged property.The cost of extending utility service lines to the property Legal fees, such as the cost of defending and perfecting title, or settling zoning issue or etc.
Business use of a personal auto and other travel expenses includes rental properties that you own but as long as the principal purpose of the trips are to maintain and manage the property. You can also deduct necessary lodging expenses and 50% of any necessary meals taken during the trip. You can claim for motor vehicle expenses, such as running costs for travelling to inspect your property or to do repairs. There are two options for claiming motor vehicle expenses - you can either use our mileage rates or claim a percentage of the total running costs and depreciation


Can equipment (tools, etc) I bought to renovate it and will stay with the property be included?=====>I guess instead of being included in the pty basis, they can be claimed each year after they are depreciated year basis

Can past taxes, insurance, etc. also be included? Or only those of the year of rental====>only those of rental in general UNLESSS you take losses and carry them forward to next years as passive activity losses

Your reply answers many of my questions. However, more arise.

The house was not habitable when purchased. Would not the repairs made to make it habitable be considered improvements, hence a part of the basis?

Otherwise, I take it that repairs per se made before the rental year are not deductible.

Can I use Section 179 Deduction for equipment I bought this year for the rental? I take it that equipment bought in prior years need to be depreciated separately, since not purchased in the current year, else ignored.

I understand how to deduct mileage for business purposes for current years, but the question still remains, can mileage that is incurred during the restoration period (the years while improvements are being made) be included in the improvement process and hence be part of the basis? All trips were made for the purpose of repairing or improving the house in addition to constructing a storage building.

Again, thank you!

The house was not habitable when purchased. Would not the repairs made to make it habitable be considered improvements, hence a part of the basis?======> it depends; An improvement is any type of renovation that will extend the ?useful life? of the property. it will add value to the property for years to come and not just in the current tax year. Improvements are generally considered adding something that was not previously there, upgrading something that was existing or adapting the asset to a new use. Improvements are usually more intensive than repairs and usually involve greater cost. A repair is maintenance that is necessary to keep the property in working condition. The IRS defines repairs as those that ?do not add significant value to the property or extend its life.? They are reasonable in amount and are necessary to keep the property in habitable condition


Can I use Section 179 Deduction for equipment I bought this year for the rental? I take it that equipment bought in prior years need to be depreciated separately, since not purchased in the current year, else ignored.===>asfaras I know no; A business can use Sec 179 to deduct tangible, long-term personal property. However, Sec 179 specifically excludes personal property used in residential rental property. This means that landlords can?t use Sec 179 to deduct the cost of items they purchase for use inside rental units for example, kitchen appliances, carpets, drapes, or blinds. The only exception is for property in hotels, motels, or vacation homes where the guests stay less than 30 days.

I understand how to deduct mileage for business purposes for current years, but the question still remains, can mileage that is incurred during the restoration period (the years while improvements are being made) be included in the improvement process and hence be part of the basis? All trips were made for the purpose of repairing or improving the house in addition to constructing a storage building.=>No I do not think so you need to report it on Sch E as part of your rental expenses. The cost of traveling by car or other vehicle is deductible in the year incurred as an operating expense so long as the travel was ordinary and necessary for your rental activity?meaning common, helpful, and appropriate for your activity.