Is the purchase price of a rental property deductible on taxes when buying to rent out?

So if my house is worth $300k and the land is $50k, I can only depreciate $250k? And I do this over 27.5 years? Do I need to get an appraisal to determine the building vs land value?

Yes, you would only depreciate the $250k building value in your example, not the land. You'll divide that $250k by 27.5 years to get your annual depreciation deduction (about $9,090 per year). You don't necessarily need a formal appraisal. Your property tax assessment usually breaks down the land vs. building value. If not, you can use a reasonable estimate based on comparable properties in your area. Just be prepared to justify your allocation if the IRS ever questions it.

Does it work with properties that are still being renovated? I haven't actually started renting mine out yet, but I've been spending money on repairs for months.

Sounds like another tax prep service. How is this different from just talking to an accountant? I'm skeptical about these online tools handling complex real estate situations.

It absolutely works for properties still in renovation. They'll help you track expenses during the renovation phase and advise which ones you can deduct immediately vs. which need to be capitalized. They explained to me that some costs during renovation can actually be deducted in the year incurred, even before tenants move in. It's different from a standard accountant because they specifically focus on real estate tax optimization and use document analysis to categorize everything automatically. They handled all my receipts and contractor invoices, even the messy handwritten ones, and created a complete audit-ready file with everything properly categorized.

Wait how does this actually work? The IRS phone lines are always busy. Are you saying this somehow gets you to the front of the queue?

Yeah right. Nothing gets you through to the IRS these days. I've tried calling about my rental property questions for WEEKS. If this actually worked, everyone would be using it.

It uses an automated system that navigates the IRS phone tree and waits on hold for you. Once it reaches an actual agent, it calls you and connects you directly. It basically does the waiting for you so you don't have to sit on hold for hours. I was super skeptical too! I'd been trying to get specific answers about depreciation start dates for a rental property under renovation for weeks. With Claimyr, I got through in about 35 minutes and the agent clarified exactly when I could start claiming depreciation (when the property is "placed in service" - ready and available for rent, even if not yet rented).

What counts as "detailed records"? I've been keeping receipts but not much else. Should I be doing more?

Receipts are a good start, but you should also note exactly what each expense was for. Create a spreadsheet that categorizes everything as either a repair or improvement. Take dated photos before, during, and after major work. Keep copies of contracts with any contractors. For example, don't just have a receipt that says "bathroom work - $3,500." Have documentation showing it was a complete bathroom remodel with new fixtures, tile, etc. This makes it clear it's a capital improvement rather than a repair. The IRS can get very picky about what qualifies as an immediate deduction versus what must be depreciated.

I've used TurboTax for my two rental properties for about 3 years. It works fine for basic rental situations but gets confusing with complex renovations. There's a section specifically for rental properties where you can enter all your income and expenses. It'll walk you through depreciation too.