repair fixes before or after first tenant moves in (tax benifits)

[Kevin McDonald]

I just purchased my second rental house and I am getting it ready for my new tenant to move in.  I am doing the standard (fixing up the inside (painting, minor repairs, etc now).  I plan on keeping this house for at least 15/20 years.  The heat pump works fine but is at least 20 if not 25 years old, the house also has some big trees too close to the house where big branch's have already fallen off the tree and have done damage to the roof in the past (I can tell by the patched shingles).  I want to have the trees removed just for preventative maintenance and change out the heat pump.  From a tax/write off point of view Should I make these repairs prior to the tenants moving in or after the tenants are in the house? 

Thanks

[J Scott]

I'm not an accountant, so I could be wrong, but here's my take...

There definitely could be tax differences between doing the work upfront and doing it after the tenant moves in.  Any work done prior to leasing a rental would go to the basis of the property and would be depreciated over 27.5 years -- it would not be expensed.  Work done after the property is leased would either be capital costs (depreciated either over 27.5 years or over the useful lifetime of the item) or would be a maintenance expense (deductible in the year that it occurred).

So, doing a maintenance-type repair after a tenant moves in could move the cost from going to the basis of the property to an immediate deduction.

That said, most maintenance (non-capex) costs are going to be relatively small, and the headache associated with trying to do these things after a tenant moves in is much worse -- in my opinion -- than the small tax hit.

Again, I'm not an accountant or tax professional, so I could be wrong...