Repairs vs. CapEx in Large Renovation - Tax Question

[Nick Gray]

I am working through my 2019 tax return, which is significantly impacted by a $200K renovation of a 12-unit apartment building that I finished late last year. I recognize that repairs are deductible in the year of and capital expenditures must be depreciated over 27.5 years or on an accelerated schedule. Most of the $200K is attributable to capital expenditures: new parking lot, new kitchens and baths, new electrical and plumbing. However, some of the $200K is related to small fixes that one would traditionally call repairs if they were not done at the same time as the big ticket renovation improvements: landscaping revamp, hallway paint and carpet, etc. 

For tax purposes, can I identify certain expenses out of the $200K and deduct them in 2019 as repairs? If so, since my contractors provided invoices to me with repairs and capital expenditures alike, how do I determine the proper dollar figure to count as repairs? It would need to be a good faith estimate. 

[Natalie Kolodij]

You're stepping over dollars to pick up pennies by trying to figure this out yourself. 

Generally ALL of a renovation before something is in service gets capitalized. The tangible property cap v. expense doens't come into play yet. 

However there are lots of items we're allowed to separate out and give shorter lives to even without a cost seg. I'd recommend working with a tax pro- on a $200k renovation there is a TON of money to be missed by not knowing what you can/can't expense.