Beginner tax question

[Jaleh Mozafarian]

Hi. I am new here and would really appreciate some help. 

I switched my home into a rental mid year. I had to do bunch of renovations in order to rent it, such as redoing a whole shower that wasn't functional plus some other repairs. Total cost was around 17K and I have only collected about 7K in rent for this year, so I have a loss.

1- Can I deduct the whole expense this year or does it depreciate over time?
And will some of the loss carry over?

2- And where do I enter this expense on the tax forms?

3- Also I bought my house in 2000, but have refinanced a few times since; last time after divorce in 2018. In Turbotax, when it asks for purchase price, date, etc., do I use the original purchase in 2000 or the last refinance in 2018 when the ex's name was removed?

4- My contractors didn't provide me with their tax ID. Do I still need to send them 1099 without knowing the tax ID since it was over $600?

Thank you in advance.

[David Orr]

Quote from @Christian Block:

Just to clarify so no one misreads that, short term rentals still go on Schedule E in most cases.  Substantial services are the only deciding factor on whether a rental should go on Schedule C, and that's pretty rare (only if you provide meals, entertainment, or daily cleaning during a guest's stay). I'm not sure if the original post is a short term rental (but if so, by the way, you also have to depreciate it over 39 years instead of 27.5).  

About the cost basis, it's based on the original purchase price, but you also have to subtract out the land value.  TurboTax does prompt users to enter the land value, and it will subtract it for you, so hopefully that's already correct as long as you had the right values to enter for that.  County tax appraisal information is an acceptable way to find out the ratio of the land value to the improvement (building) value, and then you can multiply the original purchase price by that ratio to get a reasonable estimate of the land and improvement values.  You can also add costs for any significant improvements that you've made since you bought it if you have records of that.  When you enter all that info for the basis, be sure that the software is depreciating it from the date it's in service as a rental (not your original purchase date). 

The renovations to get it ready may be considered repairs or improvements, and those are handled differently depending on if it's a repair or an improvement.  Improvements would generally have to be depreciated, except improvements under $2,500 can be expensed in the current year if you make the "de minimis election" on the return. But you still can't expense costs that are made before the date the property is available for rent... But then there's an exception to that where you can expense up to $5,000 in startup costs that happened before it is available for rent (additional startup costs above that amount have to be amortized).  And really, you may not actually want to try to expense things in the first year anyway because you likely will just end up with a passive loss that you can't use this year anyway, unless you qualify for one of the exceptions to that. 

If that sounds complicated, that's because it is, and it's hard to summarize all the specifics of how to best handle that in a forum post.  That's sort of a rough overview, but I'm still glossing over a lot of details.