taxes when selling property and improvements made to property the same year it was sold

[tanya...@gmail.com]

I have a question regarding taxes when selling property. On the California form there is a line 10 593-e stating costs of additions and improvements. We put $22,204 for that. Since we sold the property the same year as the improvement do we as the seller deduct the whole amount off our tax return or only a portion of it since that improvement needs to be depreciated over a period of time.

Before we sold the property the month before we change the floor and remodeled the property. Just wondering if we get to deduct that off our tax return for that year completely or just a very small amount for deprecation

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[Arthur Rubin]

On Wednesday, October 7, 2015 at 9:01:25 AM UTC-7, tanya...@gmail.com wrote:
> I have a question regarding taxes when selling property. On the California form there is a line 10 593-e stating costs of additions and improvements. We put $22,204 for that. Since we sold the property the same year as the improvement do we as the seller deduct the whole amount off our tax return or only a portion of it since that improvement needs to be depreciated over a period of time.
>
> Before we sold the property the month before we change the floor and remodeled the property. Just wondering if we get to deduct that off our tax return for that year completely or just a very small amount for deprecation

The full amount. Even if the property was a rental or business
property, the cost of improvements adds to the basis. Depreciation
(reported on line 6) reduces the basis, even though current-year
depreciation doesn't affect your actual taxes. (As an aside, assets
other than real property are not depreciated if sold during the
tax year when the asset is put in service. Furthermore, if it's a
personal-use property (not business or rental), there is no
depreciation allowed or allowable.)

Form 593-E provides an estimate for the tax due to the sale;
the actual tax due to the sale is almost always less.

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Arthur Rubin
CRTP, AFSP, in Brea, CA