section 179/writing off apartment turns all at once

Real Estate Investor · Portland, OR · Member since 2012 · 70 posts · 26 votes

Ok i'll try and be concise, and apologies if this has been answered already. Doing 2018 taxes (yeah i know, late). I had a multifamily remodel project happening in 2018. 2 units rented throughout construction, the rest under remodel. Technically it was an active rental that whole time right? So is there any way I can expense the remodels of the other 10 units as "repairs"? Or do I have to depreciate them. And if I absolutely have to depreciate them, do I really have to break it down to a depreciation amount for each refrigerator, each door, each floor? That will be a long list of 1000's of items to track over the next several years at tax time. Yes, I plan to have a cost seg at some point - but not right now under the gun. Thanks!

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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
6y
Originally posted by @Jeff D.:
Ok i'll try and be concise, and apologies if this has been answered already. Doing 2018 taxes (yeah i know, late). I had a multifamily remodel project happening in 2018. 2 units rented throughout construction, the rest under remodel. Technically it was an active rental that whole time right? So is there any way I can expense the remodels of the other 10 units as "repairs"? Or do I have to depreciate them. And if I absolutely have to depreciate them, do I really have to break it down to a depreciation amount for each refrigerator, each door, each floor? That will be a long list of 1000's of items to track over the next several years at tax time. Yes, I plan to have a cost seg at some point - but not right now under the gun. Thanks!

1) no you can’t write off as repairs. Improvements will always have to capitalized, with some exceptions, and depreciated no matter if your already put the apartment in service.
2) you would wanna separate them because as you already mentioned that you wanna do cost seg, so you will pay some else to do exactly the same that you didn’t now. Separating them now with the data you have could potentially allow you to take 100% bonus depreciation, if qualified, right away and you would get the similar tax implications of writing it off.
10 unit apartment is big enough to warrant professional help. Being late might have already signaled that. Good luck.

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Eamonn McElroy
Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
6y
@Jeff D.
The tangible property regs are one of the most complex areas of tax law. There's no simple, general answer to whether a cost can be expensed or whether it needs to be capitalized. It's heavily dependent on the facts and circumstances, and full of caveats and journeys through flow charts.
If you're trying to DIY a tax return that includes a 10 unit apartment building rehab today, on the extended deadline, chances are probably near 100% that you will need to later amend this tax year or file a 3115 in the future. It's that complex.
"And if I absolutely have to depreciate them, do I really have to break it down to a depreciation amount for each refrigerator, each door, each floor? That will be a long list of 1000's of items to track over the next several years at tax time."
Generally you want to separately list each unit of property in the depreciation schedule. This way it's easier to do a disposition later on down the road without having to pull up old records and carve the unit of property out of a larger group. Professional software allows tax pros to import hundreds or even thousands of assets from an excel template. I don't know if retail DIY software allows this...
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