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Post by nomngal on Jan 31, 2012 14:10:30 GMT -5
I have 2 SF rentals and am working at rewiring one. It has the old knob & tube. Will this have to be capitalized or can I just expense it? Been working over 1 year on it room by room & it's probably about $2500 so far. Just have to get 1 feed upstairs and will be done.
Thanks
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kittypuppymom
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Post by kittypuppymom on Jan 31, 2012 14:16:24 GMT -5
Repairs
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mwcpa
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Post by mwcpa on Jan 31, 2012 17:57:03 GMT -5
this would be a capital improvement (depreciated over 27 1/2 years for a residential property).... it is not a repair... from IRS ... www.irs.gov/faqs/faq/0,,id=199623,00.html |
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taxref
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Post by taxref on Jan 31, 2012 20:39:58 GMT -5
I agree with MWCPA. This is a captial improvement which must be depreciated.
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Post by nomngal on Feb 1, 2012 8:00:48 GMT -5
Does it make a difference that this is being done to bring it up to code? It wouldn't pass for financing as is.
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TheOtherMe
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Post by TheOtherMe on Feb 1, 2012 11:12:30 GMT -5
That would not make any difference. These are a capital improvement to the property.
Bringing it up to code is improving the property.
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mwcpa
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Post by mwcpa on Feb 1, 2012 11:41:27 GMT -5
"bringing it up to code" mean it will be habitable.... that's a long term improvement... that's capital in nature.....
if a former tenant puts a hole in the wall and carpenter comes and patches the hole it's a repair.... but if the wall comes down to make a doorway, that's a capital improvement....
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rangerj
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Post by rangerj on Feb 2, 2012 16:28:44 GMT -5
Message deleted by rangerj.
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rangerj
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Post by rangerj on Feb 2, 2012 16:34:34 GMT -5
In general if a repair or improvement increases the value of the property, or increases the useful life of the property, then it should be capitalized and depreciated or amortized. Rewiring, especially to bring the property up to minimum code requirements, is a capitalizable improvement. The MACRS depreciation provisions require 27.5 years for residential property and 39 years for commercial rental property. The use of ANY other depreciation method and 40 years straight line depreciation would be required. See section 168 of the tax code. If the property is being improved in order to make if habitable then all improvements and repairs need to be capitalized as costs of making the property ready for renters. Depreciation would not begin until the property is available for tenants and can be legally rented.
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Deleted
Joined: May 15, 2024 14:23:37 GMT -5
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Post by Deleted on Feb 3, 2012 5:32:29 GMT -5
As a long time landlord I agree with MWCPA and Ranger.
FWIW: Almost any repair we've done to our rental houses that is in excess of $1000 has had to be capitalized.
Also, depending on the improvement and it's amortization schedule it may be added to the cost basis of the property. Make sure you consult with a qualified tax specialist so you know for sure.
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