Can I get reimbursed for repairs at closing?

[Ken Gurta]

I will be selling a rental house very soon. It should go on the FMLS in 2 weeks or so. I will be spending approximately $5000  on repairs before selling it. Can I ask to get back the money I spent for repairs at closing before my equity is sent to a 1031 exchange company? 

[Dave Foster]

@Ken Gurta, You can but you'll pay tax on that money.  The IRS looks at that as you taking profit not a reimbursement for expenses.  Those are either current expenses that you'll get to write off on this years taxes.  Or they'll be capitalized which means they'll go into the basis of the property.  And that basis stays in the 1031 according to the IRS.  If you touch money from the sale it's taxable.