Capital Expenditures For Real Estate
Owners of real estate need to be aware of two types of expenditures and their tax treatment for their real estate holdings.
1-Capital Expenditures, and
2-Ongoing or Ordinary Maintenance & Repairs
These are expenditures that adopt the property to a new or different use, extend or prolong its useful life, or increase the value of the property/asset. Capital expenditures are generally made for additions, betterments, improvements, and major items.
Ongoing or Ordinary Maintenance & Repairs:
These are expenditures that keep the property in working order. Ongoing or ordinary maintenance and repairs are generally made on an ongoing basis for minor items
Capital Expenditures are added to the cost basis of the property. For a personal residence, they are not depreciated. For rental property, capital expenditures are depreciated according to the various IRS depreciation rules.
Ongoing or ordinary maintenance & repairs are not expensed for a personal residence but are expensed in the year incurred and or paid for a rental property.
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