Bookkeeping and category help

[Matthew W.]

Hello, We are a property managing company that rehabs and rents our own properties. I am confused when I comes to the categorization of some items. First Repairs/Maintenance and capital expense, from what I found around on the internet when you are doing a rehab/project all of the expenses from those are capital expenses. So basically anything that involves making the place look nice and a water heater replacement would be a capital expenses not a repair/maintenance category, thanks. 

[Dan V.]

@Matthew W. Any repairs done before the property is placed in service are capitalized. Any repairs other than routine maintenance done after the property is placed in service is subject to  capitalization rule, which is to capitalize the payment if it prolongs the life of the asset or improves its value. However, you also have the option to elect to use the de minimis safe harbor rule to make it more simple. Per IRS, the de minimis safe harbor is simply an administrative convenience that generally allows you to elect to deduct small-dollar expenditures for the acquisition or production of property that otherwise must be capitalized under the general rules.

Consult with your CPA for property guidance!