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My husband purchased my sister-in-law's house to use as a rental property, with her continuing to live there as a tenant. In the two months prior to actually purchasing the house, we put about $25,000.00 into it in materials and labor, replacing flooring, the kitchen, new roof and furnace, new deck, repairing an enclosed 3 season porch that was falling apart. Am I able to expense all of that on schedule E, while depreciating the amount he paid her for the house (minus an amount assigned to the land)? Or do I need to go through all the receipts separating expenses from capital improvements? I wasn't sure if it made a difference due to the fact that the $25,000.00 was spent before he actually owned it. Thanks so much,

Submitted: 229 days and 9 hours ago.

Category: Finance

Value: $15

Status: CLOSED

Watervliet, New York

Posted by Wayne Brasch 229 days and 8 hours ago.

Answer

That $25,000 should be added to the cost of the rental house and depreciated instead of being expensed all at one time on Schedule E.

229 days and 7 hours ago.

Reply

I thought that if I could not expense it all I could at least separate the $ 25,000 into two categories, those amounts that should be capitalized and those that could be expensed. There was a portion that went to what I would call repairs, i.e. things like replacing sections of rotted wood on the porch and replacing sections in the house of water stained sheetrock, replacing broken doorhandles, repainting of some bedrooms, etc. I thought those items at least could be expensed? But you are saying regardless that the fact of the work being done before purchase has no effect?

Accepted Answer

You can and should expense on Schedule E any costs of getting the house back to its original condition such as those things you are calling repairs. Any costs that add value to the original house should be capitalized and depreciated. You have the right idea about these things.

Accepts:
Expert:	Wayne Brasch
Pos. Feedback:	100.0 %
Answered:	4/7/2009

Accountant and Business C&onsultant

Master of Science in Taxation. Tax experience since 1963.

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Watervliet, New York

Answer

That $25,000 should be added to the cost of the rental house and depreciated instead of being expensed all at one time on Schedule E.

Reply

Accepted Answer

You can and should expense on Schedule E any costs of getting the house back to its original condition such as those things you are calling repairs. Any costs that add value to the original house should be capitalized and depreciated. You have the right idea about these things.

Finance

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Question

Optional Information

Watervliet, New York

Answer

That $25,000 should be added to the cost of the rental house and depreciated instead of being expensed all at one time on Schedule E.

Reply

Accepted Answer

You can and should expense on Schedule E any costs of getting the house back to its original condition such as those things you are calling repairs. Any costs that add value to the original house should be capitalized and depreciated. You have the right idea about these things.

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