Tax returns cap improvements vs repairs on POHs

(standard disclaimer : I searched the forum on some keywords before posting this, hope this hasn’t been discussed before :slight_smile: )Hi folks, love the depth of knowledge on this forum.Normally with a SFR if you do things by the book, an expense for say replacing windows would be considered a capital improvement that would not all be expensed in a given year, rather it would be depreciated over some years.  Similar for appliances.With the park-owned homes, I truly think this model doesn’t apply.  A POH comes back to you, they stole the appliances, busted the windows, etc.  It would seem that things that are cap improvements in higher grade housing are simple repairs in the MHP biz.  Additionally, it’s would be quite a bit of work to keep track of these items for every home in the park, depreciate the remaining amount of a fridge when it gets stolen, a countertop when it gets ruined, etc.How are people actually playing this one when it comes to their tax returns?Thanks in advance, cheers,Tim

We actually track all that stuff and do in fact capitalize it.  That’s the law.  Even a 1955 8x20 flat-roof mobile home that only has 5 years of useful life in it needs to be capitalized over the next 27.5 years.  That said, as soon as the appliance, home, or other capitalized item is stolen, replaced, taken to the dump, or otherwise no longer in service, you can expense all the remaining amount of it off your balance sheet if it’s not already fully depreciated.For instance, when we rehab a home, we always tell our accountant to expense any improvements to the home that are still on the books because we are almost certainly replacing them as part of the new rehab (paint, flooring, etc.).  It is rare that we have to rehab a home within 5 years of a previous rehab (that’s the life of flooring materials, for example), but we do always have our accountant check and expense anything for that house that may still be on the books.One final thought: don’t be in the appliance business.  Tenants should be getting the appliances they want for themselves.  About 1/3 of your appliances will be stolen on every turnover anyway.  Focus on providing a clean, safe ‘box’ - the four walls roof, and floor.  We don’t provide window treatments either - they get damaged/stolen equally frequently as the appliances.My 2 cents worth,-jl-

Hey Jefferson, your thoughts are always quite useful and appreciated.  Yeah, we did in fact decide to stop providing the appliances. I’ll have to think about blinds and what not.  Cheers!

HighPlainsDrifter, thank you for your post concerning ‘Repairs’ (single year deduction) vs ‘Capital Improvements’ (multi-year deductions) for Tax Purposes.I am in the midst of creating Excel Spreadsheets for our Accountant for taxes.I had placed all the ‘Mobile Home’ Expenses under ‘Capital Improvements’ for the Mobile Homes (Thus, depreciated over multiple years).  However, our Accountant (who owns Apartment Buildings) said that we could move some of our ‘Mobile Home’ ‘Capital Improvements’ over to ‘Repairs’.Below is some information from the IRS’s Website concerning ‘Capital Improvements’ vs ‘Repairs’: that “put” property in a better operating conditionImprovements that “keep” property in efficient operating conditionRestores the property to a “like new” conditionRestores the property to its previous conditionAddition of new or replacement components or material sub-components to propertyProtects the underlying property through routine maintenanceAddition of upgrades or modifications to propertyIncidental Repair to propertyEnhances the value of the property in the nature of a betterment Extends the useful life of the property  Improves the efficiency of the property  Improves the quality of the property  Increases the strength of the property  Increases the capacity of the property  Ameliorates a material condition or defect  Adapts the property to a new use  Plan of Rehabilitation Doctrine  From the IRS Chart above replacing a Broken, Leaking Bathroom Tub could effectively be classified as both:-  Repair:  Improvements that “keep” property in efficient operating condition/OR/-  Capital Improvement: Restores the property to a “like new” conditionJefferson said that he places all his Mobile Home repairs under ‘Capital Improvements’ to have multiple year deductions (capitalized over multiple years).How do others treat Mobile Home expenses? Thank you for your comments!