Deducting Capital Expenses and Maintenance

[Dru Steeby]

Hi BiggerPockets,

I have a question about taxes that I can't seem to find the answer for on google. In my breakdown of my rental property I put away 5% for CapEx and 8% for maintenance. If I do not use this money in a particular given month it stays in those accounts and is saved for a time when it is needed. My question is this: "If I don't use those funds in a particular year, can I subtract them from my taxable income or do they need to be taxed as such?"

Example, say my rental income is $1000/mo before expenses, I'd be putting away $50/mo for CapEx and $80/mo for maintenance. If I don't have any maintenance issues the whole year (I'm dreaming, I know) and don't have to spend any CapEx money, I'd have a total of $1560 sitting in my account waiting to get spent at the end of the year. Can I deduct that or are they taxed?

Thank you!

[Brie Schmidt]

@Dru Steeby - you are taxed on that income.  You can only deduct (or depreciate) on money actually spent during the year