How to properly deduct kitchen remodel on rental property taxes?

This is a common question for landlords! The kitchen remodel would generally be considered a capital improvement since it adds substantial value to your property and has a useful life of more than one year. Here's how you should handle it: The structural components (cabinets, countertops, flooring) need to be depreciated over 27.5 years as residential rental property improvements. However, appliances can typically be depreciated over a shorter 5-year period as they have a shorter useful life. The fact that the property was vacant during renovations doesn't change the tax treatment of these improvements. That's just part of the normal business cycle of a rental property. The good news is that the increased rental income ($300/month) helps justify the investment from a business perspective. When using TurboTax, you'll want to enter these as "Assets/Depreciation" rather than as regular expenses. Make sure to categorize the appliances separately from the structural improvements since they have different depreciation schedules.

After trying to figure out similar rental property deductions last year, I discovered a tool called taxr.ai (https://taxr.ai) that made this whole process so much easier. I was also renovating a rental kitchen and wasn't sure how to handle the new stainless appliances versus the custom cabinets. Their system analyzed my renovation receipts and categorized everything correctly - showing which items could be expensed immediately versus what needed to be depreciated. It also highlighted some deductions I completely missed, like being able to deduct the mileage for all my trips to Home Depot for supplies (which added up fast during a reno!).

Just wanted to follow up about my experience with taxr.ai that I asked about earlier. I finally tried it with my duplex renovation receipts and it was seriously helpful! It correctly categorized all my vacancy period utilities as immediately deductible and even showed me how to document them properly in case of an audit. The best part was how it separated out all the components of my kitchen reno - appliances, labor costs, materials, permit fees, etc. - and showed the correct depreciation schedule for each. I had no idea some smaller items under the de minimis safe harbor could be expensed immediately rather than depreciated. Definitely using this for all my rental properties going forward!

For anyone dealing with IRS questions about rental property deductions (which I've found happen more frequently with large renovation deductions), I strongly recommend Claimyr (https://claimyr.com). I had major issues with the IRS questioning my kitchen renovation deductions from 2023, and I couldn't get through to anyone at the IRS for weeks. Claimyr got me connected to a real IRS agent in about 20 minutes when I'd been trying for days. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c. The agent was able to confirm that my depreciation schedule for the kitchen cabinets and countertops was correct, and helped me understand why my initial filing had raised flags (I had incorrectly tried to expense some of the custom cabinetry).

Ok I have to eat my words about Claimyr. After commenting here last week, I decided to try it for an issue with my rental property depreciation that had been frustrating me for months. Not only did I get connected to an IRS agent in about 15 minutes, but the agent was actually helpful and resolved my question about whether my kitchen renovation needed to be capitalized entirely or if the appliances could be depreciated separately. The agent confirmed that appliances should be depreciated separately on a 5-year schedule while the built-in components (cabinets, countertops, etc.) go on the 27.5-year schedule. This was exactly what I needed to know and saved me from making a potentially costly mistake on my returns. Not sure how they get through so quickly, but it definitely works!

One thing nobody mentioned yet - keep EXTREMELY detailed records of your kitchen remodel! Take before and after photos, save every receipt, document exactly what was replaced vs. repaired. If you get audited, the IRS loves to challenge whether something was a repair (immediately deductible) or an improvement (must be depreciated). For example, replacing a few cabinet doors might be a repair, but replacing all cabinets is definitely an improvement. Same with countertops, flooring, etc. I learned this the hard way when I had to spend hours digging through Home Depot receipts from 3 years ago!

Quick question - I did something similar with my rental bathroom last year. Does anyone know if I can split the renovation into separate categories? Like the toilet and vanity as 5-year property but the tile work and shower as 27.5 years? Or does the whole bathroom have to be treated the same way?

This is such a timely question! I just went through this exact scenario with my rental property last year. One thing I'd add to the great advice already given is to consider the "unit of property" rules when determining what constitutes a single improvement versus separate components. The IRS looks at whether you're improving a single unit of property (the entire kitchen) or separate units (individual appliances, flooring, etc.). Since you did a complete gut renovation, the structural elements (cabinets, countertops, flooring) would likely be treated as one unit of property and depreciated together over 27.5 years. However, don't forget about the de minimis safe harbor election! If you have receipts showing individual items under $2,500 (or $5,000 if you have applicable financial statements), those can potentially be expensed immediately rather than depreciated. This might apply to smaller items like faucets, light fixtures, or cabinet hardware that were part of your renovation. Also, since your rent increased by $300/month after the renovation, make sure you're properly documenting this as evidence that the improvements added value to the property. This helps support your position if the IRS ever questions the capital improvement classification.