Deducting Rehab Costs

[Brad Z.]

When rehabbing a property, at what point do the expenses become tax deduction? I realize that it will raise your basis, which will effectively reduce your tax burden when you sell.


Here is an example. I bought a duplex for 8k and spent 12k rehabbing it in October. Can I deduct that 12k against other income since its under the 25k aloowable loss if my AGI is less than 100k? I have a meeting with my accountant this week so in preparation for the year end so I will know more then but wanted to see if I could get any insight on this board.

Here is one last question, lets say I have to replace a toilet next year, is that $100 expense deductable at that point or does it increase the cost basis?