The IRS expects us to track all expenses by category and capitalize any expenses that add life value to the asset. This means that these expenses will be added to the purchase price and depreciated over the asset's lifetime.
Certain improvements to a single-family residence may be depreciated if the property is held as an investment. These include:
1. Structural improvements to the home, such as additions, framing, or other improvements that are permanently affixed to the home.
2. Appurtenances to the home, such as fences, driveways, and other outdoor features.
3. Electrical, plumbing, and heating systems, including air-conditioning equipment.
4. New roofs, windows, and other improvements that increase the value of the home.
5. Home office improvements, such as computer equipment, office furniture, and other related items.
The depreciation period for these improvements is typically based on their useful life, ranging from three to 27.5 years. The deduction is taken over the course of the depreciation period, and the amount of the deduction reduces the amount of taxable income.
