Time for a different CPA?

Question

I just had a discussion with my CPA regarding writing off expenses year 1 of ownership. I purchased a rental this year and have already incurred about 7k in repairs. He says I cannot write these off this year, but need to depreciate it over the years. Is this correct? I thought depreciation was a writeoff for 27.5 years for the value of building?

Ashish Acharya · Answer

Tammy, if you did the repairs before placing the asset into service, it will be capitalized and depreciated.

John Duston · Answer

@Tammy Mason

Show him the details of the 7k as to what it was for and the dates. Then you can have a discussion on how to treat individual items

Marc Guillaume · Answer

I'm not a CPA but it seems a lot of real estate folks don't know about the De Minimus Safe Harbor election.  This election is used when a project that would normally need to be depreciated (BAR projects - project that Better the property, Adapt the property to new uses or Repair the property back to its original state.)  With the De Minimus election, any project that cost less that $2500 can simply be expensed.

The IRS language on this is confusing (they talk about a total invoice) but you can think of it this way - if you replace all the windows in a building, you can't say that each window was a different project.  But, if when a tenant moves out, you replace just those windows, then the next month, another tenant moves out and you replace those windows, that's 2 legit projects, so in this example, you could have 5k of window replacements simply expensed.  Without the de minimus safe harbor, window replacement is not maintenance.  (Note, carpeting and painting are always expensed, no matter the total cost!)

There's other details on this but hopefully your CPA knows this better.  I find that when I do a lot of work myself on my buildings, most of my minor repairs and even some bigger stuff can get under the $2500 limit, which really helps.  Who wants things depreciated over 27.5 years when inflation will reduce the value of that money in half over time?

Basit Siddiqi · Answer

Repairs get written off in the year incurredImprovements need to be capitalized over a period of time unless you qualify for some sort of election / exemption.

Chris McCormack · Answer

What did you repair? Different useful lives for different categories - could be accelerated

Chris Seveney · Answer

@Tammy Mason

Depends on the type of repairs. If they are upgrades Or major repairs then they would be depreciated, but if they￼ Were routine maintenance / minor repairs those should be expensive. Please note I am not an accountant or CPA

Time for a different CPA?

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