Rehab costs 100% deductible?

[David Bell]

If I put $20k into rehab is that entire amount deductible? Also, will it, along with depreciation, offset penalty for cashing out 401k? My 401k wasn't a lot so my 10% penalty is only a few thousand. Thanks

[Dave Holland]

David Bell

I am assuming most of your rehab is going to be capital improvements which you will add to your basis and depreciate over the useful life.

Non capitalized improvements you would deduct in the current year absolutely.

You'll certainly get to deduct the $20k but probably only some now and most of it over a period of time. Without knowing the specifics of how you are spending it it's hard to say if it will offset the penalty you would pay from your retirement account. Hope that helps.