Are the renovations for this home deductible?

[conceptmanagemen]

Converting second home that’s free and clear to an home where clients can stay for up to 24 hours whom don’t reside in the area at no charge. Are the renovations and repairs to the home tax deductible on schedule C since it’s for business purposes 

[Marc-TaxMan]

What kind of clients?  How many days annually is it occupied by clients?  Who uses it the other days
Is client's presence needed for Taxpayer's business?
Of course, it has to be a reasonably necessary expense intended to generate a profit.
If Taxpayer is artist and a subject comes to stay, housing of subject can be deductible
I have a hard time seeing business purpose for a Tax Preparer to have clients in residence

[conceptmanagemen]

Clients who are bailed out of jail but doesn’t live locally and they have to wait for someone to pick them up. Usage is depends on how many people are bailed out who don’t live in the area. 2017 it was approximately 25 people. The home will not be used/occupied outside of its intent. Yes client is needed for tax payers business.

[conceptmanagemen]

My client own this home not me.

[Marc-TaxMan]

I would claim the property as a business asset; some renovations must be depreciated over the relevant periods.  If the biz is on Sched C, yes, that's the right answer

[conceptmanagemen]

I believe the renovations and repairs are tax deductible since my client is making a profit from the clients (fees being charged for bail). But is unsure due to the fact my client isn’t going to charge the client for staying at the home as long as no more than 24 hours.

[abctax55 · Accepted solution]

"tax deductible" Yes, based on your fact pattern.  

BUT, those amounts generally must be capitalized & depreciated NOT written off in one year (depending on nature & amount as pointed out by [mention://7654820 [mention://7654820 @Marc.TaxMan]] ).  You also need to address the original cost plus improvements (or FMV when placed in service) of the house, as well as any associated land costs.

[rbynaker]

I agree.  If this really is a business expense then I think you need to go all in.  Depreciate everything allowable and apply the property regs to improvements/repairs.  Sounds plausible but I would advise the client to keep good records on how these expenses relate to revenues.

[abctax55]

And I'd be prepared to defend that there's no "personal use" of the property....

[Marc-TaxMan]

I would also emphasis security features of the property; maybe to restrain 'guests' or to protect them.  Bail bondsman must keep close watch on clients.

[qbteachmt]

These are Two Different Things: renovations and repairs

I teach it like this:

Replacing a broken window is Repairs Expense.

Replacing all of the windows with new, is Improvement to the Asset and not expense.

Then, Whether you can Accelerate that as an expense write off or not, falls under the tax regulations that apply.

You should be able to better understand this as "still invested in the property and having a significant useful life" = Not expense.

Hope that helps.