rental property purchase

[WtJt]

I purchased a duplex mid year. I live in the small apartment and rent out the larger one. The apartments were empty when I purchased the duplex, so I did a lot of work painting and repairing, replacing a furnace, etc. prior to renting it in November. Does all of this go to the cost basis of the duplex instead of repair/maintenance?

[ReginaM]

Repairs are usually fixes that help keep the property in good working condition and habitable. Although the price is irrelevant, most of my qualifying repairs tend to be under $500 in cost.  

Whether you’re fixing a hole in the wall, painting or a unclogging a shower drain, you can deduct the cost of these minor repairs from the current year’s tax liability.

The IRS clarifies in the 1040 Schedule E Instructions that  repairs in most cases do not add significant value to the property or extend its life.

Anything that increases the value of the property or extends its life is categorized as a “capital expense” and must be capitalized and depreciated over multiple years. Meaning, you can only deduct a small but even portion of these expenses in the current tax year. 

IRS Publication 527 has alot of useful information for you and your rental property.

[WtJt]

That is a helpful publication. But most of my painting, repair of bug damage, etc. were done after the purchase but prior to tenants moving into the unit. Are those still expenses related to maintenance?

[ThomasM125]

It would not matter that the work was done prior to the tenants moving in, they would qualify as repairs in the year they were done if you were readying the space to be rented. As mentioned earlier, you still need to decide if they are repairs or improvements based on the nature of the work that was done.