In 2009 I moved out of my condo that I had been living in for 14 years and converted it into a rental property. In 2004 I had some major upgrades (kitchen cabinets, new furnace, new tile floors, etc.) done worth about $10k. My questions is, am I allowed to add the cost of the upgrades to the initial purchase price to establish my basis for depreciation?

In other words, can all the major upgrades that are made since acquiring the property be added to the initial purchase price or only the upgrades that are made as part of the conversion to a rental property?

Thanks.

In general, yes - you add your capital improvements to your original purchase price to arrive at its initial cost basis as a rental property. However - you can only add those costs that improved the value of the property - items that are maintenance or were done to keep the property in good condition are not added to the cost basis. So the cost of cabinets and tile would be improvements (if they were actually upgrades over the pre-existing items), but the furnace replacement may not be - unless it added value to the home (by being a more efficient model for example).

Okay. Thank you.