I am looking to renovate my home, and relocate to short-term rental (3-4 months) durng the process. Can the rental cost be considered as part of home improvement cost and added to the cost basis?
TIA
========================================= MODERATOR'S COMMENT:
- nice try, no.
No. The rental activity is shown on Schedule E (revenues and expenses). If there's a rental gain, you pay taxes on it. If there's a loss, maybe you can deduct all or some of it depending on your income from other sources.
Personal rental costs can be deducted on Schedule E? If so, I'm moving to a fancy place to offset some of my rental income. Details, please! ;)
He has NO entries for Schedule E. He is a homeowner who is becoming a renter. He is going to capitalize the renovation expenses of his residence into his cost basis of his home. During the renovation, he will be living in an apartment, townhouse, condo, etc. and wants to know if he can capitalize the rent he will pay into the cost basis of his home.
His question is reasonable given the renovation is so extensive that he must evacuate his home and the his
3 month rental is substantial.I looked this up before the '86 Tax Act for a close friend of mine. He was have a complete rehab of his house in preparation for selling it. It was not possible then, so I doubt it is possible now.
Dick
I think there was a misunderstanding on who is renting what.
To the OP, not only is the cost of the personal rental not added to the basis of the house, but if you borrowed money to pay for the renovation and are using part of the loan proceeds to also pay the short-term rental, that part is equity debt, not acquisition debt, so future deductions of the mortgage interest may be limited by the usual rules for equity vs. acquisition debt.
-Mark Bole
Sure was. I do have to start reading all the words, not just every other one. :(
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