Do you own investment property? Did you know there are new rules for taking deductions on repairs versus improvements?

 

Investment property owners and landlords know that tax deductions are a crucial component of making sure they maximize their returns. In January of 2014 the IRS in the U.S. implemented a somewhat complex distinction as to what constitutes a repair versus improvement.

 

Why does it matter? Well, repairs can be deducted in a single year. So if you have a $1,000 qualifying repair, you can deduct it at one time. If it's an improvement, however, the $1,000 worth of work may need to be depreciated over several years. (In some cases, more than 27 years!)

 

One useful test for understanding if a deduction can be taken in a single year is whether or not it falls outside of the "Betterment, Adaptation, or Restoration" assessment. If the work falls under these categories, they'll need to be depreciated, not deducted in a lump sum.

 

There are some subtle considerations for each case. For a detailed look at what constitutes a betterment, adaptation, or restoration, take a look at this handy article:

 

Repairs vs. Improvements: Complicated New IRS Rules

http://www.nolo.com/legal-encyclopedia/repairs-vs-improvements-how-tax-deductions-differ-landlords.html

 

Granted, this article shouldn’t be taken in lieu of the advice of a trained tax professional, but I hope you find it helpful as it pertains to your investments.

 

Looking for a new investment property? We can be of great assistance when it comes to identifying overlooked opportunities in the market. Get in touch today and let’s discuss what might fit your criteria. Please call me at 910-352-0998, or visit our website at www.MyCoastwalk.com. Thanks a ton for reading!

 

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Your Weekly Real Estate Report is provided by Justin Donaton of Coastwalk Real Estate. Any data provided, unless otherwise noted, is courtesy of the Wilmington Association of REALTORS MLS and/or the National Association of REALTORS.

 

Justin does not just "list" properties, he sells them! To get your home SOLD for the highest possible price, call Justin at 910-352-0998. Justin has been the TOP SELLING real estate agent on Pleasure Island since 2007. He has the highest dollar volume of sales, and has had the most number of closings. His business is built on hard work and high-impact marketing. Coastwalk Real Estate is also a TOP SELLING real estate firm in Carolina & Kure Beach. Please visit:  www.CoastwalkRealEstate.com for more info.