Renovation of condo for rental food expenses, etc. during renovation

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jeffschips
jeffschips Member Newcomer

Hello. I hope everyone is doing well. I'm using the excellent FreeTaxUSA online tax system. Top notch!

Question: I am the owner of a condo that is now up for rent. I spent most of 2023 driving back and forth to the rental renovating it with capital improvement that I did almost all on my own. While there I had meals in and outside the unit, however all of the time spent there was solely to work on the project, then leave. Sometimes there for days and stayed there while doing the work.

I'm seeing conflicting information on these deductions: transportation, food, etc.

So what's the bottom line?

thank you very much.

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  • MatthewD
    MatthewD FreeTaxUSA Team
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    Hi,

    What you are referring to is capitalizing the costs associate with improving your income producing property prior year putting it into service.

    There is going to be conflicting opinions since the capitalization rules apply things you are going to sell or things you produce to sell or produce income. Publication 551, relates to the Basis of Assets and really doesn't address your specific questions. However, it has information about capitalizing vs deducting expenses.

    IRS publication 538 has information about Capitalization Rules.

    Here is my suggestion.

    1. Capitalize the cost of materials that directly apply to improving the condo. Paint, flooring, repairs, etc.
    2. The other indirect expense that would be a normal expense when the property is in service, like travel, food etc, add those together as a startup cost and expense up to $5,000 the first year you put the condo into service and then amortize everything over $5,000 over the next 15 years.