Can I stay at a property while rehabbing it and deduct repairs?

Question

I'm living in a house that I want to convert to a rental. If I need to come back to make repairs such as new flooring, is it ok to stay a few nights on the property itself while choosing flooring, overseeing minor repairs, etc? Or, for tax purposes, should I simply stay elsewhere (i.e. hotel)?

Dave Foster · Answer

@Dina Harleth, IRS Publication 527 will be your guide. Here's a partial quote -

"Days used for repairs and maintenance. Any day that you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. Do not count such a day as a day of personal use even if family members use the property for recreational purposes on the same day".

Make sure you run it up the flagpole with your accountant but you should be fine.

Ryan Gillette · Answer

If you're living there as a primary residence, you won't be able to deduct repairs made during the period you're living there as a Schedule E - it's not a rental property then. Realistically, if you stop in temporarily, the IRS won't know. They would be looking at obvious signs of occupancy (like is the rental property your filing address). If you're not living there and it's an investment, then the repairs can be written off per IRS guidelines. If you're self-filing, be careful with what you classify as a repair and what you classify as an improvement, as well as any tools, in terms of how you treat it as a one-time expense or as a depreciable expense over the period you own the property.

Christopher Brainard · Answer

@Dina Harleth

I don't see any problem with staying at the property, the repairs are going to be added to your cost basis for the property when you sell, which is what will drive the tax consequences. If you choose to stay at a hotel, I would imagine you could deduct that expense, provided it was a reasonable distance from your actual residence.

-Christopher

Can I stay at a property while rehabbing it and deduct repairs?

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