cancel
Showing results for 
Search instead for 
Did you mean: 
Highlighted
Experienced Member

Rentals separating capital gains expenses from ordinary expenses

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?  

4 Comments
Established Community Backer ***

Re: Rentals separating capital gains expenses from ordinary expenses

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

 

Super Contributor **

Re: Rentals separating capital gains expenses from ordinary expenses

Hi.  Let me help.

On your balance sheet you should have some fixed assets.  Typically I see rental properties:
Land

Building
Accumulated Depreciation

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:

Land
Building
Roof
Accumulated Depreciation

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

Established Community Backer ***

Re: Rentals separating capital gains expenses from ordinary expenses

@mcwagner 

 

The only thing I would add, in my opinion is that the roof needs its own accumulated depreciation account

 

address
>> land
>> building
>> >> 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

Super Contributor **

Re: Rentals separating capital gains expenses from ordinary expenses

Good point, Rustler. I usually just refer to the depreciation schedule in the tax software, but I recognize that many tax preparers don't provide this essential info to their clients. Mark Wagner, CPA