Can I claim depreciation deduction for an empty rental property I'm partially living in?

Thanks for the explanation! But wait I'm confused about the "placed in service" part. If the property isn't ready to rent because of renovations, does that mean I can't claim ANY depreciation for 2025 until the renovations are complete and I move out?

You're right to question that. Depreciation begins when a property is "placed in service" for its intended business use. While under renovation, those specific areas aren't considered "in service" yet. Once your renovations are complete and you've made those portions available for rent (even if not yet occupied by tenants), then depreciation can begin for those sections. This is true even if you're still living in the third bedroom. Just make sure you document when each portion of the property becomes available for rent.

Does it actually connect to your bank accounts or do you have to manually upload receipts? I'm terrible at keeping track of my renovation expenses and I'm worried I'm missing out on deductions.

I'm skeptical about these tax tools. How does it handle the "placed in service" date when you're doing phased renovations like OP? My accountant said that's a really tricky area.

You have options for how to upload your expenses. You can connect bank accounts if you want automatic categorization, or you can manually upload receipts if you prefer. The system handles both methods really well and even flags potential deductions you might have missed. The tool is actually really sophisticated with "placed in service" dates. You can set different dates for different portions of the property, and it calculates the appropriate depreciation for each area. For phased renovations, you can specify when each section became available for rent, and it adjusts the depreciation schedule accordingly.

Wait, so this service somehow gets you through to the IRS faster? How does that even work? I thought everyone had to wait in the same phone queue.

This sounds like BS honestly. There's no way to "skip the line" with the IRS. They're notoriously understaffed and everyone has to wait. Sounds like you're selling something...

The service uses an automated system that navigates the IRS phone tree and waits on hold for you. When an agent finally picks up, you get a call connecting you directly to them. You don't skip any lines - the system just does the waiting for you so you don't have to sit there listening to hold music for hours. It's completely legitimate and works with the existing IRS phone system. There's nothing shady about it - it's just automating the tedious part of reaching the IRS. I was skeptical too until I tried it and got connected to an actual IRS agent who answered all my questions about rental property depreciation.

Thanks for pointing this out! I hadn't even thought about separating the land value. Do you know if I can just use the numbers from my property tax assessment, or should I get a separate appraisal specifically for this purpose?

Property tax assessments are generally acceptable for determining the land-to-building ratio, and that's what most people use. The assessment should break down what portion is attributed to land versus improvements (the building). If your property tax assessment seems outdated or inaccurate, you can get a separate appraisal, but it's usually not necessary. Just make sure you document whatever method you use to determine the ratio in case of an audit. Also, keep in mind that high-value properties sometimes get additional IRS scrutiny, so good documentation is extra important in your price range.

Great question! Renovations that are capital improvements (like adding a new roof, remodeling a kitchen, etc.) get added to your property's basis and depreciated over the 27.5 years. Regular repairs (fixing a leaky faucet, replacing a broken window) can be deducted as expenses in the year you pay them. The distinction is important - capital improvements are long-term enhancements while repairs just maintain the property's current condition.

Thanks for clarifying! That helps a lot. So if I'm doing a $40k kitchen remodel, that would get added to the property basis and depreciated, but if I'm spending $300 to fix a toilet, that's just a regular expense I can deduct immediately?