Is personal loan deductible if it’s used for house repairs?

Tax, SDIRAs & Cost Segregation
4yFollow

Is personal loan deductible if it’s used for house repairs?

Josh Gardere
Rental Property Investor · Atlanta, GA · Member since 2021 · 14 posts · 6 votes

One of my properties has been hit with some code violations since it’s a pretty old house. Approximately 50-70k will be needed to get it up to code.

If I were to get a personal loan to pay for the these home repairs, would the material & labor expenses, paid with the loan, be fully tax deductible?

1Reply
38 views

Most Popular Reply

Ashish AcharyaBusiness Member
CPA, CFP®, PFS · Sarasota, FL · Member since 2017 · 5k+ posts · 3k+ votes
4y
Originally posted by @Josh Gardere:

One of my properties has been hit with some code violations since it’s a pretty old house. Approximately 50-70k will be needed to get it up to code.

If I were to get a personal loan to pay for the these home repairs, would the material & labor expenses, paid with the loan, be fully tax deductible?

Yes, but you have to structure and track the expenses correctly especially if you have legal entities. 

[email protected]941-914-7779
INVESTOR FRIENDLY CPA®4.9242 Reviews
WebsiteView Page
TaxMD® | Tax Planning Software
WebsiteView Page
1Reply
See this reply in the discussion

9 Replies

Jump to latestLatest
  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · Sarasota, FL · Member since 2017 · 5k+ posts · 3k+ votes
    4y
    Originally posted by @Josh Gardere:

    One of my properties has been hit with some code violations since it’s a pretty old house. Approximately 50-70k will be needed to get it up to code.

    If I were to get a personal loan to pay for the these home repairs, would the material & labor expenses, paid with the loan, be fully tax deductible?

    Yes, but you have to structure and track the expenses correctly especially if you have legal entities. 

    [email protected]941-914-7779
    INVESTOR FRIENDLY CPA®4.9242 Reviews
    WebsiteView Page
    TaxMD® | Tax Planning Software
    WebsiteView Page
    1Reply
  • Natalie KolodijBusiness Member
    Moderator
    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    4y
    As mentioned make sure it's accounted for correctly. 

    Also the majority of big renovations/repairs will need to be capitalized and depreciated over multiple years, not likely just written off in 1 year. So if you spend $70k don't expect a $70k write off in the same year. 

    (This is assuming it's an investment property)
    Podcast Guest on Show Pay Less Tax to the IRS This Year With THESE Real Estate Tax Strategies
    Kolodij Tax & Consulting
    WebsiteView Page
    0Reply
  • Josh Gardere
    OP
    Rental Property Investor · Atlanta, GA · Member since 2021 · 14 posts · 6 votes
    4y

    @Ashish Acharya thanks, Ashish!

    0Reply
  • Josh Gardere
    OP
    Rental Property Investor · Atlanta, GA · Member since 2021 · 14 posts · 6 votes
    4y

    @Natalie Kolodij Honestly, I would need to write it off in a year to seriously consider this route. I wouldn’t want to be stuck with that monthly payment for the duration of the term. Thanks for your input.

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    4y
    Quote from @Josh Gardere:

    @Natalie Kolodij Honestly, I would need to write it off in a year to seriously consider this route. I wouldn’t want to be stuck with that monthly payment for the duration of the term. Thanks for your input.


     Be aware that payment term is based on financing, write off is based on how the expense is claimed. For example, a roof repair that cost you $3000, could be claimed as a $3000 expense on your 2022 taxes. If you took out a three year loan to pay for this, you would pay in 2022, 2023 and 2024. The interest portion of your payment would be deductible in those tax years. If you replaced the entire roof, you would need to capitalize and depreciate, so the expense is claimed over a number of tax years. In that situation the loan may be paid off before you are done depreciating.

    1Reply
  • Jason Shackleton
    Investor · Ontario · Member since 2015 · 486 posts · 250 votes
    4y

    Hey @Josh Gardere If you can you are likley best to keep this borrowing in your entity for tax time. If the property is owned in an entity you should be looking for options leveraged off your business credit (likely need to co-sign with your personal credit however)

    Good Luck!

    Jason 

    1Reply
  • Josh Gardere
    OP
    Rental Property Investor · Atlanta, GA · Member since 2021 · 14 posts · 6 votes
    4y

    @Joe Splitrock thanks for the elaborate answer and example

    1Reply
  • Josh Gardere
    OP
    Rental Property Investor · Atlanta, GA · Member since 2021 · 14 posts · 6 votes
    4y

    @Jason Shackleton thanks, Jason — if I understand you correctly, the concern I have with getting a loan tied to my business is that it’s a young company with relatively low revenues so I’d presume that terms on that loan would be harsher than if I were to go the personal route. But I guess co-signing both would offset some of that. Still learning as I go as this isn’t the most ideal situation to be in as an investor lol

    1Reply
  • Jason Shackleton
    Investor · Ontario · Member since 2015 · 486 posts · 250 votes
    4y

    @Josh Gardere It would actually be comparable but yes slightly more expensive. However you would build business credit at the same time. Both are viable options. 

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free