Tax Question: Deducting home improvement cost

[Matthew Apostol]

Hello,

In 2018, I had a contractor do a substantial home improvement project to my town home ($29k worth).  The project included replacing the roof, replacing all windows, and installing aluminum siding to the exterior.  At the time, the town home was my residence and NOT yet a rental property.  I took out a loan to finance the improvement.  I paid interest on this loan in 2018 and 2019 before the loan was fully paid off in 2019.  Total interest paid in 2019 was about $475.00.

That town home became a rental property on August 1st, 2019.  I did not claim anything related to this improvement or the loan on my 2018 tax return.

My question is, how should I address this home improvement on my 2019 federal income tax return?  Should I:

1) Depreciate the cost of the home improvement?  Or...

2) Deduct the interest I paid in 2019 on the loan I took out for the home improvement?  Or..

3) Something else that I am not aware of?

Thank you in advance!

[Natalie Kolodij]

The improvements get added to your depreciable basis on the home as a rental property. 

The interest can be deducted as improvement interest on your home