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Irs gov freefile com Index A Accrual period, Accrual period. Irs gov freefile com Acquisition premium, Acquisition premium. Irs gov freefile com Adjusted issue price, Adjusted issue price. Irs gov freefile com Assistance (see Tax help) B Backup withholding, Backup Withholding Bearer bonds and coupons, Bearer Bonds and Coupons Brokers (see Information for brokers and other middlemen) C Certificates of deposit, Certificates of Deposit Comments and suggestions, Comments and suggestions. Irs gov freefile com Contingent payment debt instruments, Contingent Payment Debt Instruments D Debt instrument, Debt instrument. Irs gov freefile com Debt instruments Long-term, Long-Term Debt Instruments Short-term, Short-Term Obligations Redeemed at Maturity Debt instruments and coupons purchased after 1984, Debt Instruments and Coupons Purchased After 1984 Debt instruments and coupons purchased after July 1, 1982, and before 1985, Debt Instruments and Coupons Purchased After July 1, 1982, and Before 1985 Debt instruments issued after 1954, corporate, Corporate Debt Instruments Issued After 1954 and Before May 28, 1969, and Government Debt Instruments Issued After 1954 and Before July 2, 1982 Debt instruments issued after 1984, Debt Instruments Issued After 1984 Debt instruments issued after July 1, 1982, Debt Instruments Issued After July 1, 1982, and Before 1985 Debt instruments issued after May 27, 1969, corporate, Corporate Debt Instruments Issued After May 27, 1969, and Before July 2, 1982 Debt instruments not on the OID list, Debt Instruments Not on the OID List Debt Instruments on the OID list, Debt Instruments on the OID List Definitions, Definitions Accrual period, Accrual period. Irs gov freefile com Acquisition premium, Acquisition premium. Irs gov freefile com Adjusted issue price, Adjusted issue price. Irs gov freefile com Debt instrument, Debt instrument. Irs gov freefile com Issue price, Issue price. Irs gov freefile com Market discount, Market discount. Irs gov freefile com Original issue discount (OID), Original issue discount (OID). Irs gov freefile com Premium, Premium. Irs gov freefile com Qualified stated interest, Qualified stated interest. Irs gov freefile com Stated redemption price at maturity, Stated redemption price at maturity. Irs gov freefile com Yield to maturity, Yield to maturity (YTM). Irs gov freefile com E Electronic payee statements, Electronic payee statements. Irs gov freefile com F Form 1099-OID, Form 1099-OID. Irs gov freefile com Free tax services, Free help with your tax return. Irs gov freefile com H Help (see Tax help) I Inflation-indexed debt instruments, Inflation-Indexed Debt Instruments Information for brokers and other middlemen, Information for Brokers and Other Middlemen Information for owners of OID debt instruments, Information for Owners of OID Debt Instruments Issue price, Issue price. Irs gov freefile com Issuers of OID debt instruments, Instructions for, Instructions for issuers of OID debt instruments. Irs gov freefile com L Long-term debt instruments, Long-Term Debt Instruments M Market discount, Market discount. Irs gov freefile com O OID list, Debt Instruments on, Debt Instruments on the OID List OID on long-term debt instruments, figuring, Figuring OID on Long-Term Debt Instruments OID on stripped bonds and coupons, figuring, Figuring OID on Stripped Bonds and Coupons OID, figuring, Figuring OID. Irs gov freefile com Using section I, Using Section I. Irs gov freefile com Using the income tax regulations, Using the income tax regulations. Irs gov freefile com Original issue discount (OID), Original issue discount (OID). Irs gov freefile com Owners of OID debt instruments, information for, Information for Owners of OID Debt Instruments P Premium, Premium. Irs gov freefile com Publications (see Tax help) Q Qualified stated interest, Qualified stated interest. Irs gov freefile com R REMIC and CDO information reporting requirements, REMIC and CDO information reporting requirements. Irs gov freefile com S Section I, Section I. Irs gov freefile com Section II, Section II. Irs gov freefile com Section III, Section III. Irs gov freefile com Short-term obligations redeemed at maturity, Short-Term Obligations Redeemed at Maturity Stated redemption price at maturity, Stated redemption price at maturity. Irs gov freefile com Stripped bonds and coupons, figuring OID, Figuring OID on Stripped Bonds and Coupons Suggestions, Comments and, Comments and suggestions. Irs gov freefile com T Tax help, How To Get Tax Help Y Yield to maturity, Yield to maturity (YTM). Irs gov freefile com , Yield to maturity (YTM). Irs gov freefile com Prev  Up     Home   More Online Publications
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Irs gov freefile com 1. Irs gov freefile com   Rental Income and Expenses (If No Personal Use of Dwelling) Table of Contents Rental IncomeWhen To Report Types of Income Rental ExpensesWhen To Deduct Types of Expenses This chapter discusses the various types of rental income and expenses for a residential rental activity with no personal use of the dwelling. Irs gov freefile com Generally, each year you will report all income and deduct all out-of-pocket expenses in full. Irs gov freefile com The deduction to recover the cost of your rental property—depreciation—is taken over a prescribed number of years, and is discussed in chapter 2, Depreciation of Rental Property. Irs gov freefile com If your rental income is from property you also use personally or rent to someone at less than a fair rental price, first read the information in chapter 5 , Personal Use of Dwelling Unit (Including Vacation Home). Irs gov freefile com Rental Income In most cases, you must include in your gross income all amounts you receive as rent. Irs gov freefile com Rental income is any payment you receive for the use or occupation of property. Irs gov freefile com In addition to amounts you receive as normal rental payments, there are other amounts that may be rental income. Irs gov freefile com When To Report When you report rental income on your tax return generally depends on whether you are a cash basis taxpayer or use an accrual method. Irs gov freefile com Most individual taxpayers use the cash method. Irs gov freefile com Cash method. Irs gov freefile com   You are a cash basis taxpayer if you report income on your return in the year you actually or constructively receive it, regardless of when it was earned. Irs gov freefile com You constructively receive income when it is made available to you, for example, by being credited to your bank account. Irs gov freefile com Accrual method. Irs gov freefile com    If you are an accrual basis taxpayer, you generally report income when you earn it, rather than when you receive it. Irs gov freefile com You generally deduct your expenses when you incur them, rather than when you pay them. Irs gov freefile com More information. Irs gov freefile com   See Publication 538, Accounting Periods and Methods, for more information about when you constructively receive income and accrual methods of accounting. Irs gov freefile com Types of Income The following are common types of rental income. Irs gov freefile com Advance rent. Irs gov freefile com   Advance rent is any amount you receive before the period that it covers. Irs gov freefile com Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. Irs gov freefile com Example. Irs gov freefile com On March 18, 2013, you signed a 10-year lease to rent your property. Irs gov freefile com During 2013, you received $9,600 for the first year's rent and $9,600 as rent for the last year of the lease. Irs gov freefile com You must include $19,200 in your rental income in the first year. Irs gov freefile com Canceling a lease. Irs gov freefile com   If your tenant pays you to cancel a lease, the amount you receive is rent. Irs gov freefile com Include the payment in your income in the year you receive it regardless of your method of accounting. Irs gov freefile com Expenses paid by tenant. Irs gov freefile com   If your tenant pays any of your expenses, those payments are rental income. Irs gov freefile com Because you must include this amount in income, you can also deduct the expenses if they are deductible rental expenses. Irs gov freefile com For more information, see Rental Expenses , later. Irs gov freefile com Example 1. Irs gov freefile com Your tenant pays the water and sewage bill for your rental property and deducts the amount from the normal rent payment. Irs gov freefile com Under the terms of the lease, your tenant does not have to pay this bill. Irs gov freefile com Include the utility bill paid by the tenant and any amount received as a rent payment in your rental income. Irs gov freefile com You can deduct the utility payment made by your tenant as a rental expense. Irs gov freefile com Example 2. Irs gov freefile com While you are out of town, the furnace in your rental property stops working. Irs gov freefile com Your tenant pays for the necessary repairs and deducts the repair bill from the rent payment. Irs gov freefile com Include the repair bill paid by the tenant and any amount received as a rent payment in your rental income. Irs gov freefile com You can deduct the repair payment made by your tenant as a rental expense. Irs gov freefile com Property or services. Irs gov freefile com   If you receive property or services as rent, instead of money, include the fair market value of the property or services in your rental income. Irs gov freefile com   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. Irs gov freefile com Example. Irs gov freefile com Your tenant is a house painter. Irs gov freefile com He offers to paint your rental property instead of paying 2 months rent. Irs gov freefile com You accept his offer. Irs gov freefile com Include in your rental income the amount the tenant would have paid for 2 months rent. Irs gov freefile com You can deduct that same amount as a rental expense for painting your property. Irs gov freefile com Security deposits. Irs gov freefile com   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. Irs gov freefile com But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. Irs gov freefile com    If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. Irs gov freefile com Include it in your income when you receive it. Irs gov freefile com Other Sources of Rental Income Lease with option to buy. Irs gov freefile com   If the rental agreement gives your tenant the right to buy your rental property, the payments you receive under the agreement are generally rental income. Irs gov freefile com If your tenant exercises the right to buy the property, the payments you receive for the period after the date of sale are considered part of the selling price. Irs gov freefile com Part interest. Irs gov freefile com   If you own a part interest in rental property, you must report your part of the rental income from the property. Irs gov freefile com Rental of property also used as your home. Irs gov freefile com   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. Irs gov freefile com However, you can deduct on Schedule A (Form 1040), Itemized Deductions, the interest, taxes, and casualty and theft losses that are allowed for nonrental property. Irs gov freefile com See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Irs gov freefile com Rental Expenses In most cases, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income. Irs gov freefile com Personal use of rental property. Irs gov freefile com   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. Irs gov freefile com Also, your rental expense deductions may be limited. Irs gov freefile com See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Irs gov freefile com Part interest. Irs gov freefile com   If you own a part interest in rental property, you can deduct expenses you paid according to your percentage of ownership. Irs gov freefile com Example. Irs gov freefile com Roger owns a one-half undivided interest in a rental house. Irs gov freefile com Last year he paid $968 for necessary repairs on the property. Irs gov freefile com Roger can deduct $484 (50% × $968) as a rental expense. Irs gov freefile com He is entitled to reimbursement for the remaining half from the co-owner. Irs gov freefile com When To Deduct You generally deduct your rental expenses in the year you pay them. Irs gov freefile com If you use the accrual method, see Publication 538 for more information. Irs gov freefile com Types of Expenses Listed below are the most common rental expenses. Irs gov freefile com Advertising. Irs gov freefile com Auto and travel expenses. Irs gov freefile com Cleaning and maintenance. Irs gov freefile com Commissions. Irs gov freefile com Depreciation. Irs gov freefile com Insurance. Irs gov freefile com Interest (other). Irs gov freefile com Legal and other professional fees. Irs gov freefile com Local transportation expenses. Irs gov freefile com Management fees. Irs gov freefile com Mortgage interest paid to banks, etc. Irs gov freefile com Points. Irs gov freefile com Rental payments. Irs gov freefile com Repairs. Irs gov freefile com Taxes. Irs gov freefile com Utilities. Irs gov freefile com Some of these expenses, as well as other less common ones, are discussed below. Irs gov freefile com Depreciation. Irs gov freefile com   Depreciation is a capital expense. Irs gov freefile com It is the mechanism for recovering your cost in an income producing property and must be taken over the expected life of the property. Irs gov freefile com   You can begin to depreciate rental property when it is ready and available for rent. Irs gov freefile com See Placed in Service under When Does Depreciation Begin and End in chapter 2. Irs gov freefile com Insurance premiums paid in advance. Irs gov freefile com   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. Irs gov freefile com You cannot deduct the total premium in the year you pay it. Irs gov freefile com See chapter 6 of Publication 535 for information on deductible premiums. Irs gov freefile com Interest expense. Irs gov freefile com   You can deduct mortgage interest you pay on your rental property. Irs gov freefile com When you refinance a rental property for more than the previous outstanding balance, the portion of the interest allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Irs gov freefile com Chapter 4 of Publication 535 explains mortgage interest in detail. Irs gov freefile com Expenses paid to obtain a mortgage. Irs gov freefile com   Certain expenses you pay to obtain a mortgage on your rental property cannot be deducted as interest. Irs gov freefile com These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses that are part of your basis in the property. Irs gov freefile com Form 1098, Mortgage Interest Statement. Irs gov freefile com   If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098 or similar statement showing the interest you paid for the year. Irs gov freefile com If you and at least one other person (other than your spouse if you file a joint return) were liable for, and paid interest on, the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. Irs gov freefile com Attach a statement to your return showing the name and address of the other person. Irs gov freefile com On the dotted line next to line 13, enter “See attached. Irs gov freefile com ” Legal and other professional fees. Irs gov freefile com   You can deduct, as a rental expense, legal and other professional expenses such as tax return preparation fees you paid to prepare Schedule E, Part I. Irs gov freefile com For example, on your 2013 Schedule E you can deduct fees paid in 2013 to prepare Part I of your 2012 Schedule E. Irs gov freefile com You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. Irs gov freefile com Local benefit taxes. Irs gov freefile com   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. Irs gov freefile com These charges are nondepreciable capital expenditures and must be added to the basis of your property. Irs gov freefile com However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. Irs gov freefile com Local transportation expenses. Irs gov freefile com   You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. Irs gov freefile com However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. Irs gov freefile com See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Irs gov freefile com   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. Irs gov freefile com For 2013, the standard mileage rate for business use is 56. Irs gov freefile com 5 cents per mile. Irs gov freefile com For more information, see chapter 4 of Publication 463. Irs gov freefile com    To deduct car expenses under either method, you must keep records that follow the rules in chapter 5 of Publication 463. Irs gov freefile com In addition, you must complete Form 4562, Part V, and attach it to your tax return. Irs gov freefile com Pre-rental expenses. Irs gov freefile com   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. Irs gov freefile com Rental of equipment. Irs gov freefile com   You can deduct the rent you pay for equipment that you use for rental purposes. Irs gov freefile com However, in some cases, lease contracts are actually purchase contracts. Irs gov freefile com If so, you cannot deduct these payments. Irs gov freefile com You can recover the cost of purchased equipment through depreciation. Irs gov freefile com Rental of property. Irs gov freefile com   You can deduct the rent you pay for property that you use for rental purposes. Irs gov freefile com If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. Irs gov freefile com Travel expenses. Irs gov freefile com   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. Irs gov freefile com You must properly allocate your expenses between rental and nonrental activities. Irs gov freefile com You cannot deduct the cost of traveling away from home if the primary purpose of the trip is to improve the property. Irs gov freefile com The cost of improvements is recovered by taking depreciation. Irs gov freefile com For information on travel expenses, see chapter 1 of Publication 463. Irs gov freefile com    To deduct travel expenses, you must keep records that follow the rules in chapter 5 of Publication 463. Irs gov freefile com Uncollected rent. Irs gov freefile com   If you are a cash basis taxpayer, do not deduct uncollected rent. Irs gov freefile com Because you have not included it in your income, it is not deductible. Irs gov freefile com   If you use an accrual method, report income when you earn it. Irs gov freefile com If you are unable to collect the rent, you may be able to deduct it as a business bad debt. Irs gov freefile com See chapter 10 of Publication 535 for more information about business bad debts. Irs gov freefile com Vacant rental property. Irs gov freefile com   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. Irs gov freefile com However, you cannot deduct any loss of rental income for the period the property is vacant. Irs gov freefile com Vacant while listed for sale. Irs gov freefile com   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. Irs gov freefile com If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. Irs gov freefile com Points The term “points” is often used to describe some of the charges paid, or treated as paid, by a borrower to take out a loan or a mortgage. Irs gov freefile com These charges are also called loan origination fees, maximum loan charges, or premium charges. Irs gov freefile com Any of these charges (points) that are solely for the use of money are interest. Irs gov freefile com Because points are prepaid interest, you generally cannot deduct the full amount in the year paid, but must deduct the interest over the term of the loan. Irs gov freefile com The method used to figure the amount of points you can deduct each year follows the original issue discount (OID) rules. Irs gov freefile com In this case, points are equivalent to OID, which is the difference between: The amount borrowed (redemption price at maturity, or principal) and The proceeds (issue price). Irs gov freefile com The first step is to determine whether your total OID (which you may have on bonds or other investments in addition to the mortgage loan), including the OID resulting from the points, is insignificant or de minimis. Irs gov freefile com If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct. Irs gov freefile com De minimis OID. Irs gov freefile com   The OID is de minimis if it is less than one-fourth of 1% (. Irs gov freefile com 0025) of the stated redemption price at maturity (principal amount of the loan) multiplied by the number of full years from the date of original issue to maturity (term of the loan). Irs gov freefile com   If the OID is de minimis, you can choose one of the following ways to figure the amount of points you can deduct each year. Irs gov freefile com On a constant-yield basis over the term of the loan. Irs gov freefile com On a straight line basis over the term of the loan. Irs gov freefile com In proportion to stated interest payments. Irs gov freefile com In its entirety at maturity of the loan. Irs gov freefile com You make this choice by deducting the OID (points) in a manner consistent with the method chosen on your timely filed tax return for the tax year in which the loan is issued. Irs gov freefile com Example. Irs gov freefile com Carol Madison took out a $100,000 mortgage loan on January 1, 2013, to buy a house she will use as a rental during 2013. Irs gov freefile com The loan is to be repaid over 30 years. Irs gov freefile com During 2013, Carol paid $10,000 of mortgage interest (stated interest) to the lender. Irs gov freefile com When the loan was made, she paid $1,500 in points to the lender. Irs gov freefile com The points reduced the principal amount of the loan from $100,000 to $98,500, resulting in $1,500 of OID. Irs gov freefile com Carol determines that the points (OID) she paid are de minimis based on the following computation. Irs gov freefile com Redemption price at maturity (principal amount of the loan) $100,000 Multiplied by: The term of the  loan in complete years ×30 Multiplied by ×. Irs gov freefile com 0025 De minimis amount $7,500 The points (OID) she paid ($1,500) are less than the de minimis amount ($7,500). Irs gov freefile com Therefore, Carol has de minimis OID and she can choose one of the four ways discussed earlier to figure the amount she can deduct each year. Irs gov freefile com Under the straight line method, she can deduct $50 each year for 30 years. Irs gov freefile com Constant-yield method. Irs gov freefile com   If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct each year. Irs gov freefile com   You figure your deduction for the first year in the following manner. Irs gov freefile com Determine the issue price of the loan. Irs gov freefile com If you paid points on the loan, the issue price generally is the difference between the principal and the points. Irs gov freefile com Multiply the result in (1) by the yield to maturity (defined later). Irs gov freefile com Subtract any qualified stated interest payments (defined later) from the result in (2). Irs gov freefile com This is the OID you can deduct in the first year. Irs gov freefile com Yield to maturity (YTM). Irs gov freefile com   This rate is generally shown in the literature you receive from your lender. Irs gov freefile com If you do not have this information, consult your lender or tax advisor. Irs gov freefile com In general, the YTM is the discount rate that, when used in computing the present value of all principal and interest payments, produces an amount equal to the principal amount of the loan. Irs gov freefile com Qualified stated interest (QSI). Irs gov freefile com   In general, this is the stated interest that is unconditionally payable in cash or property (other than another loan of the issuer) at least annually over the term of the loan at a fixed rate. Irs gov freefile com Example—Year 1. Irs gov freefile com The facts are the same as in the previous example. Irs gov freefile com The yield to maturity on Carol's loan is 10. Irs gov freefile com 2467%, compounded annually. Irs gov freefile com She figured the amount of points (OID) she could deduct in 2013 as follows. Irs gov freefile com Principal amount of the loan $100,000 Minus: Points (OID) –1,500 Issue price of the loan $98,500 Multiplied by: YTM × . Irs gov freefile com 102467 Total 10,093 Minus: QSI –10,000 Points (OID) deductible in 2013 $93 To figure your deduction in any subsequent year, you start with the adjusted issue price. Irs gov freefile com To get the adjusted issue price, add to the issue price figured in Year 1 any OID previously deducted. Irs gov freefile com Then follow steps (2) and (3), earlier. Irs gov freefile com Example—Year 2. Irs gov freefile com Carol figured the deduction for 2014 as follows. Irs gov freefile com Issue price $98,500 Plus: Points (OID) deducted  in 2013 +93 Adjusted issue price $98,593 Multiplied by: YTM × . Irs gov freefile com 102467 Total 10,103 Minus: QSI –10,000 Points (OID) deductible in 2014 $103 Loan or mortgage ends. Irs gov freefile com    If your loan or mortgage ends, you may be able to deduct any remaining points (OID) in the tax year in which the loan or mortgage ends. Irs gov freefile com A loan or mortgage may end due to a refinancing, prepayment, foreclosure, or similar event. Irs gov freefile com However, if the refinancing is with the same lender, the remaining points (OID) generally are not deductible in the year in which the refinancing occurs, but may be deductible over the term of the new mortgage or loan. Irs gov freefile com Points when loan refinance is more than the previous outstanding balance. Irs gov freefile com   When you refinance a rental property for more than the previous outstanding balance, the portion of the points allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Irs gov freefile com For example, if an individual refinanced a loan with a balance of $100,000, the amount of the new loan was $120,000, and the taxpayer used $20,000 to purchase a car, points allocable to the $20,000 would be treated as nondeductible personal interest. Irs gov freefile com Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. Irs gov freefile com Improvements. Irs gov freefile com   You must capitalize any expense you pay to improve your rental property. Irs gov freefile com An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. Irs gov freefile com Betterments. Irs gov freefile com   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. Irs gov freefile com Restoration. Irs gov freefile com   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. Irs gov freefile com Adaptation. Irs gov freefile com   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. Irs gov freefile com Separate the costs of repairs and improvements, and keep accurate records. Irs gov freefile com You will need to know the cost of improvements when you sell or depreciate your property. Irs gov freefile com The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. Irs gov freefile com Table 1-1. Irs gov freefile com Examples of Improvements Additions Bedroom Bathroom Deck Garage Porch Patio  Lawn & Grounds Landscaping Driveway Walkway Fence Retaining wall Sprinkler system Swimming pool Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system   Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances Kitchen modernization Flooring Wall-to-wall carpeting  Insulation Attic Walls, floor Pipes, duct work Prev  Up  Next   Home   More Online Publications