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Thank you for your follow up question, Anton
For the insulation replacement, I would just add that to your basis. It's such small dollars once you break it down into the depreciation formula so I wouldn't spend a lot of time on allocation, etc.
Also, the deck restained and the door replaced are repairs and maintenance. If the door is on your rental portion of the house, then the door is fully deductible. If it's your front door, then you would only deduct the portion of that repair that is attributed to your rental.
But, these are not capitalized and depreciated over the life of your house. They are repairs and maintenance.
Replacing insulation, replacing the roof, remodeling a kitchen or bath are improvements.
Replacing a door, repainting a deck, etc are not significant improvements that extend the useful life of the asset, and are just part of the routine expense of having a home.
So, do not depreciate these items.
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How do I show these costs on my tax forms? Do I simply add them to my adjusted basis on form 8829?
No, you do not add them to your adjusted basis. You are not depreciating these items
You put them on line 19 as a direct expense
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OK, I see now. But in the future if I had an expensive improvement that had to be depreciated, how do I account for it?
You would just add to your basis.
So let me see if I understand what I should do if in the future if I did a major renovation to my house that would need to be depreciated. I would show the amount on both line 19h and line 19i of form 4562 and then add that amount (in the case of business use of my home) to line 36 of form 8829 and then go through the calculations to determine the allowable depreciation on line 41 of form 8829. Is that correct?
Megan, I'm trying to do my 2012 return. As you may recall in 2010 I set aside a small portion of my home (3.73%) to conduct my business. I continue running that business and using my home office in 2011, 2012, and now in 2013. The cost basis of my house, after deducting for land value, is approximately $300,000. In May 2012 I began renting a bedroom, bathroom, and half of the shared spaces which is equal to about 30% of the square footage of the entire house. So now do I change the amount on lie 19i of form 4562 to $210,000 and create a new entry on line 19h in the amount of $90,000 as the basis of that part of home that is rented. If so, what explanation do I need to provide to show why my home's basis lost 30% in value? And for that rental portion, do I show 30% of the basis shown on my 2010 tax form or this amount minus the amount already depreciated in 2010 and 2011? Finally what would I do, say, a year from now if I stopped renting a room but continued to run my small business.