Rental Depreciation - years after expense

[parvitstax]

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).

[parvitstax]

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.

[TaxGuyBill]

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

[parvitstax]

Backyard upgrade = Landscaping

[TaxGuyBill]

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.

[parvitstax]

So Landscaping (garden, pavement, walkway, other simple changes) in 2020 would add to the basis of the 2022 rental but should be reported as it's own asset? 

Does that mean this would be a 27.5 depreciation rate?

How would a prior improvement be depreciated then? 

[TaxGuyBill]

No, the "home" (building) is one asset.  Any prior improvement to the building are built-in to the Basis that you use.  Other assets (Land Improvement, Appliances, etc) are depreciated separately.

[parvitstax]

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?

[TaxGuyBill · Accepted solution]

Yes, yes, and yes.