From:  Tom
Date:  26 Jun 2008

If I convert my California home to income, can I write off the cost of improving or adding onto it against any income? Since the improvements will be more than ten times the expected rent, can I average out over time? What will I need to do to make the home owner-occupied to use the $500,000 exclusion?

Answer

Date:  03 Jul 2008

Hello Tom,

Improvements to your home that is converted to rental property are capitalized and depreciated. If the improvements are for a residential building, the depreciation is claimed over a 27 ½ year period. Land improvements are depreciated over a 15 year period.

How to qualify for the exclusion from sale of a residence depends on how long you rent the property before you want to sell it.

Don't you think it's time to have your income tax returns prepared by a professional preparer? That's our business!

See IRS Publication 523, Selling Your Home, and IRS Publication 527, Residential Rental Property.

Good luck!
Mike Gray

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