Deducting repairs done while living in a property?

Question

I'm currently living in a house that I want to convert to a rental. I've been told by a couple accountants that I can have repairs done while I'm living here and still deduct them - that I can justify that these were done in order to "prepare the house for renting." Is this true or should I have moved completely out before starting repairs? Also, is replacing carpet that’s extremely stained and ripped up in some areas considered a repair or still an improvement? (Not sure whether to replace yet with carpet, or tile, or laminate, if it makes a difference.)

Thank you!

Ken Teng · Answer

@Dina Harleth So long as you can justify that these repairs are related to the satisfaction of a potential renter.

Dina Harleth · Answer

Thanks @Ken Teng. Do you know if it matters whether these are done over a period of several months prior to moving out? I have a chronic pain condition that causes me to have to take things very slowly, though these would certainly be done to prepare the house for rental, not for my personal enjoyment.

Ken Teng · Answer

As long as you can justify the repairs as preparation for renting, it does not matter where you are during the repairs. IRS does not care.

I would think of carpet change as repairs. Home improvement is large projects that may affect the house sale price, e.g., building a new deck or pool.

Sometimes the boundary between repairs and improvement is blurry, e.g., replacing all plumbing to use copper parts. My two cents here are classifying those as repairs as much as possible. Because repairs can be deducted the very year, while improvements can only be counted during sale. Current money is always better than future money.

Jeff B. · Answer

Replacing like for like is a REPAIR, upgrading is a capital improvement.

eg: replacing a single pane window with another single pane is a repair, but going to a dual or triple pane window is an improvement (extra insulation improving both cooling and heating)