rehab expenses dededucted immediately v. depreciated over 27.5 yr

[Christian Rojmar]

Good evening BiggerPockets members. Does anyone have a great source for what rehab items can be deducted immediately v. depreciated over 27.5 years? I understand that the major items like replacing floors, bath, kitchen, and HVAC will be depreciated over 27.5 years, but there are some items like scraping the ceiling, updating a drive way, and fixing a bathroom closet that I am not sure about. Can I just put up a "for rent" sign in the yard once the major items have been taken care off and the provide a list of all the remaining items to an accountant who can make a determination for me? Just want to make sure I do not get in trouble for putting up a for rent sign too soon. And I know, I should have gotten an accountant already but working on that now!

[Linda Weygant]

Anything done prior to placing the property in service as a rental is added to basis and depreciated over 27.5 years.

Putting a For Rent sign in the yard doesn't matter.  Yes, I know there's a BP blog that says you can.  No, it's not right.  Never was and there are several tax pros here who have been trying to get BP to take it down for years.

What qualifies as "In Service" is asking yourself, is this property ready AND available for rent.  In other words if your For Rent sign is in the yard and somebody walked up the sidewalk and qualified to rent the property, could they move in tomorrow?

This can be true if you're just working on a few punch list items.  It's not true if the house is still a construction zone in any way.

The answer to your question is VERY different if you've had the property in service already, pulled it out of service temporarily to do upgrades and then put it back into service.

In that case, you'd have issues surrounding De Minimums Safe Harbor, where you have a lot more leniency in what you can write off right away vs what must be depreciated.