Timing my renovations - does this make sense?

[MooseHead]

Does it make sense to spread out renovations (repairs) over several years to take advantage of expense deductions to reduce net profit? Basically I'm in the process of completely renovating the main level unit of my up/down duplex. I will also need to rebuild the stairs/landing area to the second unit upstairs in the near future as well as completing a few other tasks. I had planned on waiting until next year to redo the stairs etc, so that I can have some expenses to claim against my net profit for 2014.



Does this make sense? Or does it simply work itself out if I complete all renovations this year (taking a loss) and show a large net profit next year vs. spreading out my repair expenses?



It seems like common sense, I just want to be sure I'm not missing anything.



Cheers,



MH

 

[DanW]

I spent quite a bit last year on renovations and I had a loss and received money back from the government. I am not one to time things though. I just do things as soon as possible so I can get the best tenants, the most money and have less calls for repairs. It makes my life easier. So far I like this method. I am going to renovate a whole house this summer as well. I have done 2 so far this year and that will be the last house to do until I buy more. After that it will be much easier and plus I like it when the houses look nice. So for me I just spend now and make more later, but my method may not be the best tax advice. It works for me though.

 

[Thomas Beyer]

[quote user=MooseHead]Does it make sense to spread out renovations (repairs) over several years to take advantage of expense deductions to reduce net profit?
no

 

[Sherilynn]

If your expenses create a loss, then that loss will either reduce your overall tax burden or (depending on spouse's income) could result in a loss carryover that can be deducted in future years.



Either way, it would be my preference to schedule the repairs/renovations as I could afford them, for several reasons:

• it could result in better quality tenants and the higher rent will offset the tax savings.
• if you have a contractor working on the property, it is often simpler and more cost-effective to get several projects done at once.
  you will probably have unexpected repair expenses in future years that will offset your income.
  paying taxes is means you are making money.