Capital Expenditure Policy

[Nathan Volkmann]

Looking for any advice/ knowledge people have about capital expenditure policy's.

I bought my first rental and I am currently housing hacking. I made the rookie mistake if waiting until tax season to get tax advice and help filing my taxes. I received my tax file for review and approval for filing my taxes. During my conversation with my cpa, they mentioned that I need to make a $2500 capital expenditure policy for purchases. Meaning, any purchase over this threshold will have some kind of depreciation schedule. Any purchase under this schedule will be a business expense for the year.

Has anyone adopted this kind of policy or have even heard of it?

Granted I am new to the game, but based on the little bit I thought I had learned, capital expenditures would be related to items that 'replace' or 'improve' the property. 'Repairs' to a property would be business expense for the year.

If this is a more common thing than I realize, does anyone have questions or suggestions for conversations I should be having with my cpa about this?

I haven't been able to discuss more with my cpa yet, but figured this would be a good place for advice.

Also, if I'm using the buzz words incorrectly, please let me know.

[Ashish Acharya]

Originally posted by @Nathan Volkmann:

Looking for any advice/ knowledge people have about capital expenditure policy's.

I bought my first rental and I am currently housing hacking. I made the rookie mistake if waiting until tax season to get tax advice and help filing my taxes. I received my tax file for review and approval for filing my taxes. During my conversation with my cpa, they mentioned that I need to make a $2500 capital expenditure policy for purchases. Meaning, any purchase over this threshold will have some kind of depreciation schedule. Any purchase under this schedule will be a business expense for the year.

Has anyone adopted this kind of policy or have even heard of it?

Granted I am new to the game, but based on the little bit I thought I had learned, capital expenditures would be related to items that 'replace' or 'improve' the property. 'Repairs' to a property would be business expense for the year.

If this is a more common thing than I realize, does anyone have questions or suggestions for conversations I should be having with my cpa about this?

I haven't been able to discuss more with my cpa yet, but figured this would be a good place for advice.

Also, if I'm using the buzz words incorrectly, please let me know.

 What he is talking about is de minimis safe harbor to expense 2500 or less. One of the requirements is to have you book expensing  equal tax. You should have a policy treating same expense for book that you are going to do for tax. For a taxpayers as yours, book is almost going to equal tax, so policy is implied if you items expense for book as well. 99.9% don’t have written policy.

Also you can also always backdate a policy if he/she wants to see something in writing.