What to Expence a Rehab as

[Brett Sayers]

I’m into my second major rehab and have been purchasing materials for the contractors to use on my credit card.

1. To get the rewards points

2. Cash is tight and I need to keep room for labor as the contractor doesn’t take cards

3. I was thinking I might get a better price on materials if I did a little leg work

I have been expensing all of the credit card purchases as “Supplies” for the Schedule E. I just wrote the check for the first draw and don’t know if I am putting it in the right bucket come tax time. The labor is currently listed under “Repairs”. What I’m wondering is if I could list the materials bought such as lumber for subfloor, flooring, cabinets, toilets, and appliances as “Depreciation” or leave it as “Supplies”. My understanding of it is that the Depreciation expense becomes a stretched out tax deferral, and the supplies / repairs are written off on this years taxes in one lump. Is there a common practice for this, or is it a matter of preference/ opinion for the tax payer?

*** Disclaimer *** I am not taking anyone’s opinions as legal or tax advice. This is for ideas on what to talk to my CPA about towards the end of the year and help save a bit of time.