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About Mike Wellman
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I was a former Manager with Price Waterhouse, now PricewaterhouseCoopers, the largest accounting firm in the world. I have had clients in almost every industry and of every size.
I will only answer questions dealing with IRS problems such as delinquent tax returns, Offers in Compromise (Tax Settlement), IRS collection matters including installment agreements, liens, levies, seizures, audits, appeals, innocent spouse claims and injured spouse claims. All other will be referred to the question pool.
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Over 25 years experience in taxation specializing in IRS collections, examinations and appeals.
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New York Times, Wall Street Journal, Your Money.
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BBA, Baylor University.
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IRSOS.com won the Knowledgeweb award for educational excellence for content.
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You are here: Experts > Business > Corporate Law > Tax Law (Questions About Taxes) > Rental Property
Expert: Mike Wellman
Date: 1/28/2008
Subject: Rental Property
Question
Thank you for taking the time to answer my question. I have a rental property that I purchased that needed a good amount of repairs to make to make it rentable. For example, the kitchen floor was literally torn up and needed to be replaced. The aluminum siding on half of the house was ripped off and missing. There were some broken windows that needed to be replaced. I know there is some confusion between what is a repair and what is an improvement. Am I going to be able to deduct the entire amount of all these repairs this year, or am I going to have to depreciate it ? My objective was to get the property ready to rent out, and be liveable.
What I was told, is that I can deduct this entire amount this year since the property was available for rent, and being advertised. I had people looking at the place before the repairs were completed. My tenants signed the lease before the repairs were finished. I just want to make sure that is right.
Thank you for your time.
Answer
Some items such as the floor and aluminum siding must be capitalized. Others, like the windows can be expensed in the current year. You can also deduct currently things like trash hauling and lawn care.
The general rule is that you capitalize things that add value or extend the life of the property. You currently expense things that maintain the property in its present or normal condition.
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