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!

[Nicholas L.]

@Aaron Orenstein

I would talk to a CPA

[Bill Hampton]

@Aaron Orenstein

Yes, timing matters.

I recommend finding an accountant who specializes in real estate taxation, tax planning and financial planning. Yes, we exist.

You may want to consider working with your accountant remotely to expand your options.

I would also recommend looking for a accountant willing to work with you throughout the year. You want an accountant who can help you strategize and who is responsive when you want to know the consequences of the financial decisions you are making throughout the year.

Good luck.

[Bryan Montross]

Do talk to your CPA as timing does matter. Just because you have moved out and plan to turn it into a rental, the repairs may still have different tax consequences if you haven't "placed it in service". And make sure your CPA really understand rental properties and has rental properties of their own. It makes a huge difference in their understanding.

[Tanner Bellamy]

Timing definitely matters. It would be worth speaking to a tax professional especially when you are getting into real estate investing. The door opens wide open for tax strategy then.

Good luck!

[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.

[Basit Siddiqi]

Yes timing matters but don't let it be your only decision.

If there is a $1,000 repair that you have to make regardless that may take 1-2 momths to do, you may save $400 in taxes but you would potentially lose 1-2 months of rent.

Best of luck with how you move forward.