friends we own a rental and it needs repaired can we take it off as a loss on taxes or a home improvement?

Question

friends we know own a rental property in ny and it needs repirs new furnace new bathroom floors and a hot water tank and so on can they get a home improvement tax credit for these repairs or is it a loss on their taxes

Answer 1

Rental property income and expenses go on Schedule E. All expenses are deductible in some way. Some are deductible immediately, others need to be depreciated over time.

Most "repairs" are detectable in the year the repair is made. Repairs are generally defined as fixing something but not replacing it. If you replace a burner in a hot water heater, it is a repair. If you replace the whole hot water heater, it is a replacement. If you fix a hole in the roof, it is a repair. If you replace the roof, it is a replacement. Repairs are written off in the year they occur. Replacements need to be depreciated over the "expected" life of the item. The IRS keeps a list of "expected" lifetimes of certain items. Most are 5 years. How to depreciate it is too complicated for this forum, but your tax accountant will know what to do.l

Some people will tell you that you can write off new items in the first year by using something called a Section 179 expense. Unfortunately, Section 179 doesn't apply to rental property, so every replacement or new item much be depreciated. It isn't the end of the world, it just makes your taxes a bit more complicated. Any good tax preparer will be able to handle it just fine.

So, yes, repairs and replacements and any expense associated with the rental property is deductible...but some are deductible all in the first year and some are spread over many years.

Good luck!

Answer 2

If the property is strictly a rental then the repair expenses can generally be taken as an expense of the business on Schedule C.
Possibly a new floor should be added to the cost basis for the property and be depreciated, but it the project is more replacement than upgrade and the amount is not too large then it can be taken as an expense.

Answer 3

Yes: I own a rental that is two family. I live on the first floor and have tenants upstairs. Anything I do for their unit it tax deductible.
So are half the utilities.