Primary residence to rental - prepping and repairs, tax deductions

[Aaron Orenstein]

Hi All,

My wife and I just purchased a larger house on our block, and plan to keep our current home as a rental. We had already been planning to do some maintenance and repairs (repave driveway, re-insulate attic, replace two broken faucets, other minor items), but were wondering if, for tax reasons, we are better off waiting until we close on the new home and this is no longer our primary.

Can this work count toward tax deductions as preparatory work on rental property, even if it's currently our primary? Does the timing matter?

Thank you!

[Ashish Acharya]

Yes, the timing matters for tax deductions. To deduct repairs and maintenance, they must be done after the property is converted to a rental. Repairs like fixing faucets can be deducted in the year they are performed, while improvements like insulation must be capitalized and depreciated over time. If you do the work before the property becomes a rental, it won’t be deductible but can increase your cost basis for capital gains tax. It’s best to wait until after the property is a rental to maximize tax benefits.