Repairs expense on personal dwelling of rental property - Sch E

[Winston A.]

I occupy 1/2 of my rental property, and rent out the other half. I spent $20K on repairs/supplies/materials & $20K in labor on my personal residence of the rental property.

I only plan on living here for 5 years, then renting out the whole property Can I deduct any of this on my 2010 tax return? or is all this lost money since it was spent on my personal residence.

[Dave Toelkes]

Winston,

No, money spent on your personal residence is a personal expense. If some of your renovations were for energy efficient improvements, you may qualify for up to $1500 in energy efficiency improvement tax credits.

The $40K you spent on your residence is added to your cost basis. It is not lost money. If you move out in five years and convert your home to a rental, you can recover that cost through depreciation.

Consult your CPA for detailed guidance.