Buy and Hold tax deductions

[John Khadiyev]

I am in a process of buying a property to rent it out. I know that the cost of bringing the house to habitable conditions is only deductible when you sell the property. But since you can deduct property maintenance every year. what is the rule and where does cost of updating property between tenants and updating property before tenants make a difference in tax deductions. What counts as maintanence cost? carpet, paint, broken sprinkler head, a new driveway?
The property I am buying needs about $12k in repair and I want to know if I can deduct it this year legally. Or I can't until I sell the house. I do not plan to sell it for a very long time.
Hope this makes sense.

Thank you
John

[Account Closed]

Capital Expenditures are defined as expenses that add to the value or useful life to a property.

Repairs are expenses that keep property in an ordinary efficient operating condition and do not add to its value or appreciably prolong its useful life.

Land improvements are those betterments, improvements and site preparations that ready land for its intended use. Like land these improvements are inexhaustible and therefore not depreciated. Examples of land improvements include excavation, filling, grading, demolition of existing buildings, and removal or relocation of other property.

There are several choices here. I would reiterate that filling in a swimming pool adds no value and certainly doesn't extend the life of the property. I see no way of classifying this asset as a capital improvement. I would be interested in arguments that support that idea.

Some might call this a land improvement. Generally speaking though land improvements make a property ready to use for the purpose of building a structure. In this case the land is being used for its intended purpose. I would not call this a land improvement either.

IMO again, there is good reason to say that you are bringing the property back to its ordinary and efficient operating condition.

I'm sure that I can go beyond the definitions and site some regs to prove this point.

I think some IRS agents might try to show this was a nondepreciable land improvement, but I think that could be refuted fairly easily.