Write off Rehab Costs with BRRR Strategy?

Question

Can you write off rehab costs as repairs and maintenance when using the BRRR strategy?

Jenny Bayless · Answer

@Ben Clark unfortunately there is not a ton of work around for this. However, you could always wait to do true repair costs until after you place the property in service. For example, if you want to wait til you have renters in to do routine maintenance such as gutter cleaning, you could deduct it. You just have to be careful that it is not actually an improvement, betterment, or restoration and that it is actually truly just a routine maintenance or minor repair when you do this. If it turns out you need to replace your gutters completely or in the majority, then this will need to be capitalized, no matter when you do it.

Ben Clark · Answer

I want to maximize deductions without needing to recapture

Ben Clark · Answer

thank you @Jennifer B.! Are there any loopholes to this?

Jenny Bayless · Answer

Hi @Ben Clark

The costs incurred in rehabbing your property prior to putting it in service must be capitalized. After the property is put into service (available for rent), then you may analyze each cost to determine whether it needs to be capitalized or if it may be deducted. Let me know if you have any questions.