I had a long term tenant move out in July and I spent 4 months restoring the house back to good condition, spent about 11K in expenses and materials. I got new tenants in Nov. Everything good. I went to get my taxes done and since I only collected about $5500 in rent for the year that's all I can write off and the rest will have to wait until next year. I've been renting it a long time ( 20+ yrs) and I seem to recall in previous years when the year was a loss I could write it off.

There are Repairs (deductible even if they exceed income) and there are Capital Improvements (begin depreciation in the year they were placed in service.)

I purchased a once million dollar apartment building back in 1997, at the depths of the recession for only $250,000. It was a Bank REO that they couldn't dump at almost any price. The building had gangs, squatters and some paying tenants.

I spent the next 9 months doing evictions, repairs and remodeling. I spent around $200,000 on repairs during that period.

Since all units were in service when I purchased the property, and could prove it with court documents, I was depreciation the purchase over 27.5 years and then taking my $200,000 in repairs and breaking it down by:

Labor

Materials

and deprecating the life of the products (Such as appliances, carpets, blinds, painting, flooring ,etc)

The IRS saw a red flag, paying $250,000 and then writing off $200,000 on top of the purchase price associated with the structure. And during that 9 months only having $9,750 in re-portable rental income for that property.

I found myself in front of two IRS auditors. They were after my blood. Tax fraud, etc. They said I was in trouble and I was lucky if I didn't go to jail. I responded with treats of my own.

I told them that I was a "Real Estate Professional and my write-offs were perfectly legal"!

They responded by saying that I didn't have a "Brokers" License and therefor wasn't a pro!

I said the audit is over, I won't deal with clowns, jokers and those who take the attitude to threaten my freedom.

It really depends on how detailed you want to detail that 11,000 in repairs. That said, someone else might judge this as $6,000 in repairs and 5,000 in capital improvements.

You are dealing in a grayer area. One of the test questions on the repair, how long will the repair last as compared to the system that did exist before and how long will the that system now expected to last

You might want to look up safe harbor limitations.

wmh that I believe is wrong.

If you just purchased a property and it has NEVER been up for rent by you then yes any improvements are capital improvement. To coincide with that-- if you have no rentals and take training you can not deduct that expense. Once you have a rental property your classes etc, can be claimed.

The part of your statement about in-between tenants that those are capital improvements I think is incorrect. It has been your rental its not new to the fold. Basic in service for you.

MYOB, you might be right about that but the rules are dam vague about repairs vs. improvements and when, as you know!

You are all missing the point entirely on the post. It is not a question of repair vs. cap improvement. If that were the issue, the amount of rental income would be irrelevant.