Timeframe after closing to patch mend repair interior items

[Andrey Y.]

I thought about posting this in the tax forum but realized this is more along the lines of a general or landlording topic.

Do you guys do patch/mend/repairs on a property shorty after escrow to count it as the "cost basis" for the property, or wait a little while (with or without tenants already in place) to do it and just count it as a repair for that year. As an example (fixing vinyl flooring in the kitchen).

I THINK it would be more advantages to do the latter from a tax standpoint, but likely there are subtlties and other viewpoints to consider.

[Brandon Hall]

@Andrey Y.

@Daria B. and @Frank Woodin have done a pretty good job explaining the pros and cons. I too recommend you speak with a real estate accountant or CPA. I can't offer you concrete advice as I don't know your tax or financial position, but I can give you a high level overview. 

First, it all depends on when the property is placed in service. If you make repairs prior to the property being placed into service, those repairs are treated as improvements, meaning they are added to the cost basis and depreciated over the life of the asset. 

Second, developing a strategy depends on your tax position. Are you in a low tax bracket? If so, you may benefit from capitalizing everything in order to shelter income later on (assuming you move up in tax brackets). You will be shelter income in the for of depreciation. On the other hand, if you are in a high tax bracket, it's generally better to deduct (repairs) as much as possible to shelter your income and provide you with a passive loss. Depending on income levels, this passive loss may or may not be deductible against your ordinary income. 

Hope this helps. Let me know if you have questions.