Sold SFH Rental Property. Questions on improvements.

Tax, SDIRAs & Cost Segregation
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Sold SFH Rental Property. Questions on improvements.

Michael Anderson
Houston, TX · Member since 2015 · 14 posts · 1 vote

Hi everyone. I recently sold a SFH rental property to capitalize on the current market. This is the situation:

6 year tenant moved out. Repairs had to be done, including flooring, paint and some plumbing. After the work was done, we decided to sell the property instead of rent to new tenant. 

Question: Should I offset the rental income with the repairs? Or use the repair expense to offset the Gross Sale amount of the house?

Thanks!!

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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
4y

Rental income as that will be taxed as ordinary income. The gain will be cap gain. 

However, there are other factors involved to make that determination, and the end result may be the same with both approaches depending on what is going on with your personal situation. 

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    4y

    Rental income as that will be taxed as ordinary income. The gain will be cap gain. 

    However, there are other factors involved to make that determination, and the end result may be the same with both approaches depending on what is going on with your personal situation. 

    [email protected]941-914-7779
    INVESTOR FRIENDLY CPA®5241 Reviews
    WebsiteView Page
    TaxMD® | AI-Powered Tax Planning
    WebsiteView Page
    1Reply
  • Michael Anderson
    OP
    Houston, TX · Member since 2015 · 14 posts · 1 vote
    4y

    Thanks Ashish. I think it's a wash either way. Appreciate the reply!

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  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    4y
    Quote from @Michael Anderson:

    Thanks Ashish. I think it's a wash either way. Appreciate the reply!

    Not necessarily. There's some room for creativity here, due to the possible difference of tax rates. Whether or not it can move the needle enough to justify the hassle - that is case-by-case.
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  • Eddie L.
    NY · Member since 2021 · 143 posts · 45 votes
    4y

    Wouldn't these fall under routine maintenance in which case deductible against the rental income? 

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