I heeded @Brandon Hall 's advice and immediately after buying my rental properties I posted them for rent (next day) - making them available and ready. I have proof of this for my records. While waiting for a tenant, I painted the units, installed flooring, etc.. Using Hall's recommended BARRRR method, I plan to expense the majority of the work (all individual projects well within the IRS de minimus $2,500 limit). However, in my accounting records, should these be keep seperate or should they be recognized as expenses in the months incurred?
Also, in regards to expenses paid when purchasing the properties (closing costs, inspections, appraisals, etc.), are these recorded in my ledger or are they kept separate and depreciated with the property?
I am using Cash Accounting in case it's relevant. Thanks.
Hi @Account Closed ,
I work for Brandon's firm. Since you're using cash accounting, your repair and maintenance expenses (including de minimus) will be accounted for in the month you paid for them.
As for the closing costs, some will be reported as expenses in your ledger while others will be added to the basis of your property and depreciated. Brandon wrote a thorough article on this called The Ultimate Guide to Schedule E.
$2,500 is more involved than breaking one project into separate sub-projects. Have your accountant review your breakdown. It's possible that some of the work does not qualify.