Repair and Capital Improvements are great ways to add value to a property, but regulations do apply. The IRS is very specific about which expenses are deductible for your investment property and which ones are not. True repairs and maintenance replacement of a property can be fully deductible in the year they are expensed. These items include items that need to be fixed from broken or damaged components of the property. Repair or replacement of similar components is not considered “improving” the property. Other expenses such as HOA, Property Management, utilities, property taxes are all deductible in the year of expense.
Items such as an A/C unit or septic tank, new roof or new Kitchen cabinets are considered “capital improvements.” These expenses must be deducted over a 27.5 year depreciation schedule from the year of installation. Renovations or new appliances are not considered repair expense deductions.
It’s important that you and your CPA or Tax Preparer qualify these expenses correctly, so you avoid costly state or IRS audit corrections.
Our Property Management software presents your monthly and annual maintenance and repair costs so you are prepared to schedule them. Our goal at Real Living is to make tax time less stressful by providing you with accurate third party reporting of your property expenses. Let us help you make tax preparation less stressful too!