许多德州的2021十大正规彩票app投资者都在进行修缮, 更新, and improvements to enhance a property in preparation for listing it with a real estate broker. Investors relinquishing the property in a 1031 like-kind exchange often ask if they can be reimbursed from the 1031 exchange for the costs associated with improving or repairing the property immediately before the sale.

答案是否定的——除非产生税收后果. The reason is that any proceeds—whether money or benefits of any kind or property that is not “like-kind” that an investor receives from a 1031 exchange—are known as “boot” and are generally taxable to the extent the investor has a capital gain tax consequence.

然而, improvements an investor makes to a relinquished property can be added to the cost basis of the property. In simple terms, the cost basis is the amount a property is worth for tax purposes. The cost basis changes over time and becomes known as the adjusted basis. The adjusted basis can be increased by adding capital improvements made to the property. The adjusted basis also can be reduced by factors such as depreciation deductions taken annually on tax returns during the ownership period.

一般, the cost of making capital improvements with a useful life of more than one year is added to the adjusted cost basis. This is referred to as a capital expense and must be capitalized and depreciated over multiple years. An improvement includes enhancements that add value to the property, 延长其使用寿命, 或使属性适应新的用途. 资本改善可以包括增加房间, 新浴室, 新的屋顶, 甲板, 击剑, 线路升级, 车道, 人行道, 管道的升级, 厨房升级. The IRS uses the following categories to define a capital expense, which must be depreciated:

  • Improvements: A taxpayer must capitalize any expense made to improve an investment property. An expense is for an improvement if it results in a betterment to the property, 恢复属性, 或使属性适应新的或不同的用途.
  • 改善:修复先前存在的缺陷或状况的费用, 扩大或扩大财产的, 或者增加容量, 强度, 或者财产的质量.
  • Restoration: Expenses for replacing a substantial structural part of a property, 修复因伤亡损失而造成的财产损失, 或者把房子重建到一个全新的状态.
  • Adaptation: Expenses for altering the property to a use that is not consistent with the intended ordinary use of the property when initially purchased or held for investment.

相反, costs that can be deducted as current expenses are amounts paid for incidental repairs and routine maintenance. 这些费用不加到调整后的成本基础上. Repairs are usually one-off fixes or repairs that help keep the property in good working condition and habitable. A real estate investor can deduct the cost of minor repairs from the current year’s tax liability. 然而, the cost of minor repairs does not reduce the investor’s capital gain tax liability to the extent they have a capital gain. The IRS clarifies in the 1040 Schedule E Instructions that “repairs in most cases do not add significant value to the property or extend its life.” Real estate investors in Texas can find more information on basis and adjusted cost basis in IRS Publication 551, 资产基础.

A 1031 exchange is an excellent tax deferral option for Texas real estate investors who want to dispose of one property held for investment and invest in another like-kind replacement property also held for investment. Knowing how improvement costs factor into the transaction and whether those costs will be taxed is essential when assessing the merits of a real estate transaction. 一如既往地, investors should seek the advice of a tax advisor regarding the unique facts and circumstances of their specific transaction.