I currently have my rental set up as a customer with the tenant set up as a job. I have some expenses (repairs, etc.) that I need to list as a capital gains expense to depreciate and some expenses (insurance, cleaning service, etc) that I need to list separately to take the deduction for that year. How do I separate the two?
repairs are not capital improvements by definition.
Post your repairs to repairs expense
there is no such thing as a capital gain expense that can be depreciated
Hi. Let me help.
On your balance sheet you should have some fixed assets. Typically I see rental properties:
When you have a repair "expenditure" that needs to be depreciated, you need to create a new fixed asset account. Say it's a new roof. Now you have:
the "expense" comes through depreciation, which you usually enter at year end when you (or your tax pro) completes the tax return. That's depreciation expense, and a corresponding credit to accumulated depreciation.
It's VERY important to track this stuff, because when you sell the property (or it gets demolished in a hurricane - I had three clients with these in 2017) you will need to accurately know both your original cost (basis) and accum depr to calculate any gain or loss.
Holler if questions.
Mark Wagner, CPA
The only thing I would add, in my opinion is that the roof needs its own accumulated depreciation account
>> >> accum dep building
>> roof (xx/xx/xxxx)
>> >> accum dep roof
That way should something happens again to the roof and replacement is needed, it is easier to extract the present roof book value