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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10164
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Plumbing ruptured in 2nd house we were renting to daughter.

Customer Question

plumbing ruptured in 2nd house we were renting to daughter. I paid several thousand dollars to repair house to bring it into condition to sell. sold house for a $1000 profit. Are expenses to bring up to standard to sell deductible?
Submitted: 8 months ago.
Category: Tax
Expert:  Lane replied 8 months ago.
Hi,...Yes, if these were standard repair and maintenance items, they are deductible on your schedule E (where rental income and expense are reported, against other passive income, such as rent BUT become deductible FULLY upon sale of the house...If these are capital improvements, they are added to the basis of the house and will reduce your capital gain on sale, (and any other capital gains you may have for the year, then can be used (up to $3000 per year) against other income, until used up over time....How do you tell the difference between the two? Here’s a rule of thumb: An improvement is work that prolongs the life of the property, enhances its value or adapts it to a different use. On the other hand, a repair merely keeps property in efficient operating condition. Let’s take a quick look at a few examples.
Expert:  Lane replied 8 months ago.
Repairs: Generally, the term includes items such as painting and wallpapering, repairing leaks in a roof, patching up cracks in a floor, or replacing a worn out or broken component of an air conditioning system....Improvements: Replacing an old roof with an entirely new one clearly is an improvement that must be capitalized and depreciated. So is the cost of renovating an entire structure, remodeling a building to suit a different purpose, or reconditioning or rebuilding a piece of machinery....Here's the IRS guidance on this: https://www.irs.gov/Businesses/Capitalization-v-Repairs-Audit-Technique-Guide...And here's and excellent (and much more readable) overview: http://www.nolo.com/legal-encyclopedia/repairs-vs-improvements-how-tax-deductions-differ-landlords.html
Expert:  Lane replied 8 months ago.
I hope this has helped....Please let me know if you have any questions at all....If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the faces or stars on your screen, and then clicking “submit That’s the only way JustAnswer will credit us for the work here....Thank you!Lane……I hold a JD (Juris Doctorate, the law degree), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance & tax, as well as CFP® and CRPS designations. - I’ve been providing financial, Social Security & Medicare, estate, corporate & tax advice since 1986