How to Document Repairs for Tax Deduction
Good recordkeeping is essential for maximizing your tax deductions when completing repairs around your property. Making sure you keep the right records and track all information correctly can help you save those extra few bucks you may not have known about – if you didn’t document properly. In this article, we’ll take you through the steps of how to document repairs for tax deduction.
Know What to Track
The most important thing to consider when documenting repairs for tax deduction is that you need to track all your costs. This includes any labor, materials, delivery costs, or rental tools that are purchased to complete the repairs. Make sure to record the date and details of all purchases along with pricing. It’s important to note that you don’t need to save actual physical receipts. Instead, you can take pictures of them or track them digitally – it’s all up to you.
Track Time Spent on Repairs
Your time is also worth something, and if you decide you’d like to include the hours you’ve spent working on repairs in your deductions, you’ll need to be able to provide proof. Make sure you track how much time you’ve spent on each repair and document it.
Keep Records of Tools and Equipment
Any tools and equipment you purchase specifically for repairs qualify as a tax deduction for certain types of businesses. From shovels to generators, everything you buy for repair work can help boost your deductions. Make sure your records show what items you purchased, when you bought them, and how much you paid.
Document Professionally Done Repairs
If you hire a professional to do any of your repair work such as plumbing, electrical, or other highly skilled labor, you’ll need to make sure you document the cost of their services. Keep records of their invoices and other necessary documents.
Document Construction Materials
If you purchase construction materials like lumber, paint, or tile, be sure to document everything you buy and keep records of the cost of each item. You should also document where you purchased the materials and what they were used for.
Report Intangible Repairs
If you have repairs on your property, you can also include intangible costs such as rental assessments or other fees in your deduction. Just make sure you keep records of all the costs associated with these repairs.
Know What You Can’t Deduct
Just as important as knowing what qualifies as a deduction, you also need to be aware of what doesn’t. Common deductions include costs associated with purchasing or repairing tools or materials used in repairs or any associated expenses like delivery costs or labor. However, any improvement to the value of the property doesn’t qualify. These include changes like landscaping, painting, or replacing an existing system or appliance.
How to Record Repairs for Tax Deduction
To make the most of your repairs for tax deduction, it’s important that you record all of the details correctly. Here are a few tips to help ensure your deductions don’t get rejected:
Keep Detailed Invoices
You should be able to provide thorough documentation for all repairs made on your property. This includes invoices and receipts, which should include the cost of the materials, any labor costs, and delivery fees.
Document All Your Work
If you’re doing the repair work yourself, make sure to keep records of how much time you have spent working on the project, what tools you have used, and any other expenses associated with the repairs.
Keep Track of Everything
To ensure all your expenses count as deductions, keep records of any intangible costs incurred during the repair process. This includes rental assessments, legal fees, and other associated costs.
Conclusion
Good recordkeeping is essential for taking full advantage of your tax deductions for any repair work you have done around your property. By documenting every purchase, the hours of labor you’ve put in, and any associated intangible costs, you can make sure all your deductions are valid. Taking the time to track all the information correctly will save you those extra few bucks you may not otherwise have known about.
What repairs qualify for tax deductions?
Tax deductions related to repairs vary depending on the country and specific tax regulations. Generally, you may be able to deduct the costs of repairs and maintenance related to the practice of conducting business activities. For example, if you own a rental property that requires repairs, those costs may be deductible. For personal repairs, the cost of associated materials, such as replacement parts and tools, may also be deductible.
What documents do I need to provide to prove repairs made qualify for tax deductions?
The documentation you will need to provide to prove that repairs made qualify for tax deductions will depend on the type of repair made. In general, you should make sure to obtain a copy of the invoice or receipt for the repairs, any warranties or guarantees, and any other records pertaining to the repair job such as photographs or contractor estimates. Additionally, you should keep records of the repairs, including the date of the repair, the address of the property, and the total cost of the repairs. These documents should be kept for at least seven years from the filing date of the tax return in which you claim the deduction.
Where can I find a list of qualified repair expenses for tax deductions?
The Internal Revenue Service (IRS) provides a detailed list of tax-deductible repair expenses in Publication 946, “How To Depreciate Property.” This publication explains tax-deductible repair expenses in detail, as well as which repair expenses do not qualify as tax deductions.
