Do I need to issue a 1099 for a rehabbed property I hold?

[Matt Murphy]

I have read many articles related to needing a W9 from your contractor and ultimately issuing a 1099 eventually to account to payments made to the contractor during flips. I have not seen anything about if this is still necessary for rehabbed properties that are not sold, is it the same? This is related to a BRRR which we bought, completed and refinanced within this year and plan to hold for a long time.

Additionally, let's say we sell the house in 10 years, do I need to keep all of the receipts and invoices from the rehab until we sell to track the capital improvements so that we use the improved value of the property (purchase + rehab) instead of just the purchase price?

[Michael Albaum]

Disclaimer***I'm not a tax professional, so go talk with one, but yes you need to issue 1099s for all of the work you paid to have done. Also keep track of your materials budget if you paid for that personally. Your tax records will show what your basis in the property is, hence the importance of issuing the 1099s since that will be reflected on your taxes.

Also, if the rehab costs were fairly significant, $30k+, I'd definitely look into having a cost segregation done, it can be amazing!