Expense tracking for rehabs

[Josh Sterling]

This year we purchased several bank owned properties requiring moderate rehabs. We spent 12-30k on each house to get it to an above market quality for rent. This rehab amount includes:
Contractor Labor, carpet, paint, doors, windows, appliances, tile, siding, driveways, etc.

I have logged all expenses in an excel spreadsheet, and came up with a total for each individual rehab.

My question is: Do I just get to add that total to my cost basis in the property and depreciate it over 27.5 yrs, or do I get to devide things into their specific recovery periods (5, 7, 15, 27.5 yrs) and depreciate them using their faster recovery periods?

Disclaimer- I will end up doing what our accountant advises, I'm just trying to do a little pre planning before we take our tax paperwork to him, and it's nice to get a discussion going to learn from everyone on BP :)

Thanks,

SR

[Dave Toelkes]

Just to clarify Steven's previous answer.

Repairs performed to get your property ready and available for rent are capitalized and added to your cost basis.

Repairs performed after your property is in service as a rental are expensed in the year you paid for them (cash basis accounting).

In other words, repairing the crack in the wall and replacing the light switch as part of the general renovation to get your property ready for rental use are capital costs and are added to your basis. If the property is in service as a rental, then the cost to repair the crack in the wall is a deductible expense.