Full question:
The duplex that I have owned since 1991 and have been repairing termite damage (for approx 2 1/2years) and abating lead base paint. I declared only 1/2 of deduction expenses because I had many tool and personal items in one half. And rented the other half. It has been minimal 1- month and 3months respectively each year because I require non-smoking it is difficult to rent. IRS now says I am not entitled to any deductions/interest/depreciation/nothing. They say I have to capitalize everything. I did captilaize $11,000 in actual improvement such as new windows, eaves, and etc. However they say I am not eligible for the $20,000 repairs because it took to long. Repairs did not raise the value of the unit. The duplex has up to date permits. I reside with a friend at a different location and do not own this house.
- Category: Taxes
- Date:
- State: National
Answer:
You can deduct the cost of repairs to your rental property. You cannot deduct the cost of improvements. You recover the cost of improvements by taking depreciation. A repair keeps your property in good operating condition. It does not materially add to the value of your property or substantially prolong its life. Repainting your property inside or out, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows are examples of repairs. If you
make repairs as part of an extensive remodeling or restoration of your property, the whole job is an improvement. An improvement adds to the value of property, prolongs its useful life, or adapts it to new uses. If you make an improvement to property, the cost of the improvement must be capitalized. The capitalized cost can generally be depreciated as if the improvement were separate property.
Some taxpayers can elect to recover all or part of the cost of certain qualifying property, up to a certain dollar limit each year, by claiming a Section 179 deduction. By taking the Section 179 deduction a taxpayer chooses to deduct depreciation up front rather than over the life of the
asset. It is especially important to remember that the Section 179 deduction may be taken only on assets acquired for use in trade or business, not on property used for other income-producing activities, such as rental activities.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.
