Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
8y
The answer is going to be "It Depends"
Rehab costs before or after the asset is placed in service?
Electing De Minimus Safe Harbor or not?
Are the expenses repairs or upgrades?
Do you have passive losses locked or not?
Are you looking to sell soon?
What are your other sources of income and how much are they?
What type of investing? Flipping, Rentals?
Way too many scenarios here to just state which way it should be done. And if you get 99 people saying their accountant does it one way, that doesn't mean that it's the right way or the best way for you.
If you trust your tax preparer, then trust that they know what they are doing.
Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
8y
The answer is going to be "It Depends"
Rehab costs before or after the asset is placed in service?
Electing De Minimus Safe Harbor or not?
Are the expenses repairs or upgrades?
Do you have passive losses locked or not?
Are you looking to sell soon?
What are your other sources of income and how much are they?
What type of investing? Flipping, Rentals?
Way too many scenarios here to just state which way it should be done. And if you get 99 people saying their accountant does it one way, that doesn't mean that it's the right way or the best way for you.
If you trust your tax preparer, then trust that they know what they are doing.
Real Estate Consultant · Norfolk, VA · Member since 2017 · 345 posts · 201 votes
8y
@Mary Gallardo For flip business, direct costs (acquisition, rehab materials & labor) and indirect costs (taxes, interest, insurance, etc.) that are properly allocable related to development and construction of the property are capitalized. Indirect costs not related to development and construction of the property can be expensed such as marketing/advertising, general & admin expenses. Holding costs (taxes, interest & insurance) can be deducted after the property is placed in service or ready for sale.
I would recommend reaching out to CPAs specialized in real state industry for proper guidance.