Investors – IRS Issues New Rules on Deducting Repair Costs

Reblogger Emily Medvec
Real Estate Broker/Owner with eXp Realty LLC NM Broker License 16161

Given the new landscape of real estate and the condition of our housing sector, it is important to know about the IRS new rules on repair cost deductions. This post by Tom Branch is a must read and important info to pass forward to investors.

Original content by Tom Branch TX Broker 0513551

IRS Tax Returns

The Internal Revenue Service has issued a 255-page guide in the Federal Register. The new rules, which went into effect on January 1, change the way investors can deduct repair and improvement expenses.

In the past, most investors took the one-time deduction of the repair or improvement expense during the tax year in which it was done. The new rules clarify what is a repair and what is an improvement.

An ordinary business repair of an asset is generally tax-deductible in the current tax year. An improvement is usually classified as a capital expenditure and gets depreciated over time.

Eric Lucas, a principal at KPMG LLP and a former Treasury Department tax counsel, said in an interview that this one of the more significant changes" from current accounting policy and could be troublesome for businesses that took "an aggressive view" in deducting repairs.

Investors should discuss these changes with their CPAs or Tax preparers now in order to make preparing their 2012 tax returns easier next year.

Photo Licensed from iStock Photo | Blog based upon a story published in Inman News

Originally posted at http://www.thebranchteam.com/wordpress/2012/01/21/investors-irs-issues-new-rules-on-deducting-repair-costs/

 

Tom Branch and Gina Branch, The Branch Team with RE/MAX Dallas Suburbs, service the greater North Dallas suburbs including Dallas, Plano, Allen, McKinney, Frisco, Lewisville, and Carrollton.  While Gina concentrates on traditional listings and buyer/tenant representation, Tom specializes in assisting distressed homeowners to avoid foreclosure.  Tom and Gina have published two books (Achieving Rock Star Status and The Field Guide to Short Sales) and are available for speaking engagements in the greater Dallas - Fort Worth Metroplex. Subscribe to The Branch Team Blog.

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Rainer
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Edward Gilmartin
CRE - Boston, MA

One would think in this economy that government would take steps to ecourage renovation not discourage it. Typical.

Jan 24, 2012 01:01 AM #1
Rainmaker
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Lottie Kendall
Compass - San Francisco, CA
Helping make your real estate dreams a reality

Great choice of a post to re-blog. Always good to review expense vs. improvement rules -- sounds especially important now.

Jan 24, 2012 02:22 AM #2
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Emily Medvec Sells Santa Fe Real Estate! Call/Text 505-660-4541
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