271. IRS Secrets: How Safe Harbors & BAR Tests Maximize Tax Savings & Boost Real Estate Profits
Tax Smart Real Estate Investors Podcast
Understanding Betterment, Adaptation, and Restoration in Property Expenses
Betterment refers to expenses that increase the value or prolong the life of a property. Adaptation involves changing the use of a property, such as repurposing a warehouse into an apartment building. Restoration includes expenses that return a property to its original state after significant deterioration, like repairing a roof or upgrading a plumbing system. Expenses that do not meet the criteria of betterment, adaptation, or restoration could be considered repair deductions. Safe harbors provide guidelines for repair and maintenance expenses, but not meeting them does not automatically mean an expense is a capital improvement. It's important to consider the betterment, adaptation, and restoration tests to differentiate between repair, maintenance, and capital improvement expenses.
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