Tax write offs for renovations to rental property?
Friday, August 7th, 2009 at
11:50 am
In ‘07 I spent about 18,000 adding a basement in-law apartment to my multi-family home. I was hoping I could write off the expense against my rental income. Is this legally possible?
Sell House Quick
Related articles:
- Can I deduct improvements made on my rental property if I work with a property manager or only if I manage? I am planning to rent out my house. I have made considerable renovations to the property. I was told that I could write these home improvements off when my...
- Can I claim renovation expenses for a rental property on my income tax? When we bought this house, the back portion had already been converted into a separate unit, but it was in really, really bad shape. We spent some money fixing...
- Investment Property Claiming Renovations? Ok I had bought an investment property in Perth (August last year) and I renovated it straight away spending $15 000 (total) on a new kitchen, bathroom, tiles painting...
- New Canadian Home Renovation Tax Credit The Canadian government revealed on January 27th, 2009 a temporary Home Renovation Tax Credit. This renovation credit will apply to work done on houses, cottages and condominiums owned for...
- High Impact Renovations Renovating a house can be a challenging but rewarding experience. However, when it comes to the best way to spend your renovation dollars, consider what will have the most...
Tagged with: Adding A Basement • Renovations • Rental Property • Tax Write Offs
Filed under: property renovation
Like this post? Subscribe to my RSS feed and get loads more!
No, you cannot deduct those. You use that to adjust your cost basis in the property upwards. Don’t forget to depreciate the cost of the improvements! The depreciation will be recaptured at sale time whether you claim it or not.
From the information that you have provided my best guess is that the $18K would be added to your basis and depreciated (separately from the rest of the property). If that is the case the most “write off” you would get in 2007 would be $654. However there are a number of factors that could go into that determination and you would be well advised to consult with a tax professional before proceeding with your tax return.
You can deduct the cost of repairs to your rental property. You cannot deduct the cost of improvements. You recover the cost of improvements by taking depreciation
Separate the costs of repairs and improvements, and keep accurate records. You will need to know the cost of improvements when you sell or depreciate your property.
A repair keeps your property in good operating condition. It does not materially add to the value of your property or substantially prolong its life. Repainting your property inside or out, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows are examples of repairs.
If you make repairs as part of an extensive remodeling or restoration of your property, the whole job is an improvement.
An improvement adds to the value of property, prolongs its useful life, or adapts it to new uses. Improvements include the following items.
- Putting a recreation room in an unfinished basement.
- Paneling a den.
- Adding a bathroom or bedroom.
- Putting decorative grillwork on a balcony.
- Putting up a fence.
- Putting in new plumbing or wiring.
- Putting in new cabinets.
- Putting on a new roof.
- Paving a driveway.
If you make an improvement to property, the cost of the improvement must be capitalized. The capitalized cost can generally be depreciated as if the improvement were separate property.