Property Management - Repairs & Misc.Tax Paperwork Questions

[Victoria C.]

Hi All,

I'm a new landord and I have a property manager, and I know very little about taxes, but I know you can deduct a lot of the repairs & expenses, etc. I want to make sure I'm keeping my paperwork trail correct for when I file.

A few questions below:

1. My property manager tells me I need to repair the railings/deck on my back portch.  They gave me a few quotes and the payment will be deducted from the tenants incoming rent.  So the contractor will be paid through the property management and not through me.  Will this affect the tax deductions and how I would file?  Should I keep the repair payment directly through me or is it ok for the property management company to pay?

2. I know a handy-man/friend that isn't a contractor that can do the work for less $.  Can I have him do the repairs, and as long as I have a copy of the check payment transaction? (No receipt)

3.  I plan to turn my current primary residence into a rental, and I plan to paint the walls and do some misc. fixes before I leave.  Can this be deducted before a tenant comes in?  Is there a certain date that considers it a rental vs. primary residence? 

Thanks in advance!

[Steve Vaughan]

Overview from a laymen that's been doing his own taxes for a long time:

Even though the repair is slated to come from rent, your PM should be reporting 2 different items to you.  Rent in, expense out.  This isn't a tenant working in lieu of rent, so it should be easy for you to distinguish.  And yes, I would hire my handyman if they can do the work well.

Your primary turns into a rental when it becomes 'in service'.  As far as I know, you can begin advertising it for rent, then do your painting and fix-ups.  That would qualify as 'in service'.   Advertise first.

I'm sure a tax pro will chime in and correct me if necessary, but that's how I would do it.  Keep in mind, if you rent for more than 35 months, you will lose any 121 exclusion on cap gains of your primary. If there has been good appreciation, you may want to sell prior to month 36. Good luck @Victoria C.!