Can repairs be deducted before renting out rental real estate.

[cipparulo12345]

Client purchased rental real estate on 6/03/20. Made Repairs of $16,000 and Improvements of $19,000 after that. Rented out to tenant starting 11/01/20.
Can the repairs be deducted or amortized as startup ($5,000 + 180 months) or neither? Can the improvements be depreciated over 27.5 months?

[ATSMAN]

I have deducted $5000 as startup expense and the balance amortized over 15 years when expenses are incurred prior to the date when the unit is made available for rent. This fellow is lucky that the expense was not more than 50K otherwise the $5000 is reduced further by the amount it exceeds.

[TaxGuyBill]

Expenses to get an asset ready to be "placed in service" are generally added to the Basis of that asset for depreciation.

As far as "Startup Expenses" go, that only applies to a "Trade or Business". So the rental would need to rise to the level of a "Trade or Business" in order for any qualifying expenses to be used under that. But as I mentioned before, I think in most cases any expenses to get an asset "in service" are part of the Basis of that asset.

[cipparulo12345]

yes not really a trade or business so add to Basis of Asset. Thanks for the input.

[sdarave]

good insights! I had a similar issue this year and applied everything to basis. Playin it safe. I love this BB.

[Dude]

next time he should do the improvements (to make it livable) before he lists it for rent then make the repairs after it is listed

[Bucky]

Just note some of the improvements can have a lot shorter life than 27.5 years. Break out flooring, appliances etc.