Tax Deductions vs. DIY Property Management and Fixes

[Victoria C.]

I'm a new landlord since April, and I've heard and lightly researched all the tax deductions you can have on your rental property, and it all sounds really good... but I feel like I'm missing something. They say you can deduct all maintenance, repairs, utilities, HOA, property management fees, mileage, home office, etc. If you can deduct all of those things and get that money back in taxes, why choose to do it yourself or go cheap on the fixes? I've heard people talk about the water expenses that the tenant uses up, swapping out the broken refrigerator for a used one instead of new, etc... but won't you get that all back in taxes? I wouldn't mind spending a lot on the repair if I knew I was going to get it back at tax time. Also, I'm looking to replace my windows and cast iron plumbing piping in the next 5 years or so. Can that be deducted or is that considered a renovation rather than a "repair"? This is for my rental in Sacramento, CA. Thanks in advance!

[Tobias Falzone]

(i am not an accountant, talk to an tax expert about this)

A tax deduction doesn't mean you get it all back.  Say I pay 100$ to repair a fridge in a rental unit, I get a $100 deduction but if my tax rate is 30% then I only get 30$ Back.  I'm still $70 poorer.  I can deduct repairs the same year, but I have to depreciate improvements over 27.5 Years in most cases.  I believe your windows and pipes would fall into the improvement/renovation category.  If I do everything DIY and save 100$ on a repair, I get to keep the $70 I would have spent after taxes.  You just have to ask how much is your time worth.  If you are in a low bracket, it can make sense to DIY, but if you are in the 50%+ bracket, then its not as advantageous.