If you own a rental property, chances are good that you have invested plenty of time and money into making the property more appealing to renters. The good news is that the money you spend to repair and update your rental is tax deductible. The bad news is that your repairs may be classified as improvements causing the deduction to be spread over 27.5 or even 39 years!

So, when is a fix-up considered a repair and when is it an improvement? A repair is work done to restore property to its working condition. A repair does not add value to the property or prolong its life. On the other hand, an improvement makes the property better in some way. You have improved property when you increase its value, extend its useful life, or alter the property so that it has a different use.

In general, you want your rental fix-ups to be classified as repairs, because you can deduct the entire expense now verses a small fraction of the cost. Here are some tips to make certain you achieve the desired classification.

1. Separate repairs from improvements – A complete overhaul of a rental property is generally considered an improvement. Let’s assume that your rental needs a new roof, new counter tops, repairs to cracks in the walls, and a deep cleaning. If you hire a contractor to perform all of this work, the amount of the combined bill will be considered an improvement. However, if you can get a separate bill for each project, only the roof and the counter tops will be classified as improvements and the rest as repairs.

2. Use similar materials – The quality of materials used in a repair demonstrates your intention. For example, several of your cabinet doors are looking shabby. If you restore them with the same wood and paint as the other cabinets, you have a repair. However, if you decide to update them with more fancy or higher-quality materials, this is an improvement.

3. Fix only what is broken –The words “new” and “replace” often indicate that an improvement was made. Replacing an entire roof because of a leak is an improvement. But if you simply patch the roof using similar materials as the rest of the roof, this is a repair. You have restored the roof to its previous, working condition. Anything beyond this point would be an improvement.

4. Repair after an incident – Improvements are typically planned, but repairs usually won’t happen unless you notice a problem. Fixing a broken pipe or a hole in the wall would be a repair. Something occurred to make the work necessary. Keep track of tenant requests for repairs for extra support of your deduction.

5. Repair property while occupied by tenants – Repairs made while a building is unoccupied are most often classified as improvements by the IRS, because they can easily argue that you are renovating the property between tenants. You will have a stronger argument for repairs if you have tenants in place when the work is done.

6. Classify repairs correctly on your books – It would be hard to convince the IRS that your repairs are actually repairs if you classify them as improvements on your financial statements.

A combination of good planning and good records are very important to getting the repair deductions you desire. You should always consult your tax advisor before beginning repair projects to ensure the best outcome for your tax situation.

This post was written by John Huddleston of Huddleston Tax Consulting.  Here’s how John describes himself and his business: I have a small tax accounting firm called Huddleston Tax Consulting. My focus is small business taxes & accounting. Myself and four CPAs  provide tax preparation, consulting, payroll, business valuation, bookkeeping/quickbooks service to businesses in Seattle, Bellevue, Redmond, Kent, Federal Way, Renton, Bothell, Everett and Marysville. These are all cities in Washington State. There is more information about my firm at my website Seattle Bellevue Tax Accountants/Certified Public Accountants.

My firm consist of myself and four CPAs that work for me. Prior to starting my firm (about 7 years ago), I worked for a Seattle CPA firm for about three years. I am a Certified Public Accountant and I have a law degree and a masters in tax law (I don’t practice law however), both from the University of Washington School of Law. Two of the CPAs that work in my firm were previously employed at “big four” CPA firms and they both have Masters in Tax Accounting degrees.

You may already know how to apply for your LLC or corporation on the Secretary of State Corporations website.  You may also know where, after getting your letter of approval from the SoS, to apply for your IRS EIN number online.  Of course, don’t forget about your state business license application and your city business license, too.  If you do business in Seattle, here’s the link for that.

What about those who are just starting to think about starting a business, though?  There are plenty of resources for you, as well as for small business owners who need help - from free classes to one-on-one business counseling and information on how to get small business loans. Without further ado, a few links to help Washington State and Seattle business owners answer a whole host of questions:

• Washington State offers a great primer website called Doing Business in Washington.  Many of the questions you were asking about starting a business (or never thought to ask) are answered in one place.
• The University of Washington’s Business Development Center is located at the UW’s Bothell campus, and offers business students the opportunity to assist King and Snohomish County business owners problem-solving and strategic planning assistance, including one-on-one business counseling and more.
• The Washington State Small Business Development Centers “promote economic vitality by providing advice, training and research to entrepreneurs and existing businesses statewide.”  Whether you’re just starting your business or are already established, the SBDC has something to offer that will help you build and grow your business.
• Last but not least, the Washington division of the Small Business Administration offers business owners and entrepreneurs free classes and resources on how to obtain small business loans, business taxes, and more.

Finally, a “non-official” but wonderfully helpful resource is Biznik.  This small business networking site allows members to host events, start discussions, and post articles in a wide variety of topic areas.  If you’re looking to connect with other small biz owners, this is a great website to check out.  And a tip?  Their search engine optimization is amazing; if you pay the $26/month for their highest level of membership, you won’t regret it.

First things first - don’t fall over in shock that I’m actually writing a blog post!  I’m following through on a recent commitment I made to myself to be more proactive and present here on my blog.  So if you have specific questions you’d like to see answered, leave me a comment to drop me an e-mail and I’ll do my best to respond in a future post!

After recently helping a client successfully register a trademark that had been denied three times, I realized that many of you might be doing the DIY approach to trademarks.  While I’ll always recommend using an attorney with lots of trademark experience over doing it yourself, I know many of you won’t take that advice!

John Grant and Mona Ibrahim have put together a Trademark Law Basics for Small Business seminar that would be a great place for you to start when thinking about naming your business/product and contemplating the trademark process.  It’s hosted through Biznik; if you’re not a member already, you can join for free (though I highly recommend upgrading to a paid membership - the benefits are worth it!).  The seminar is on Thursday, March 4, 2010 at 2:00 p.m. and the location details and RSVP information is on the event page.

You owe it to your business to know as much as you can about choosing a name and understanding the trademark process.  Plus, this seminar will help you make an informed decision on whether to use an attorney to register your trademark or whether to take the DIY approach.

If you go, tell John I sent you!

Just a quick post to inform all of you Seattle area small business folks about a future opportunity. In conjunction with a few other service providers, I’ll be participating in the Small Business Institute of Seattle & Bellevue.  I’m developing a class that will help you understand some of the legal considerations you’ll face as you start your small business.  John Huddleston will be talking about business tax considerations and the basics of S-corps and LLCs.  Check the website often for updates and I’ll keep you posted here as the classes develop!

I am sorry I haven’t been posting as often as I should - things are really busy, which is a wonderful thing. I can’t wait to bring you some great small business content in the future, especially for those of you in the greater Seattle area.

In the meantime, I wanted to share some cool news with you all - I was interviewed recently by Lance Godard of The Godard Group on Twitter. For those of you unfamiliar with Twitter, it’s a form of micro-blogging that limits users to 140 characters per “Tweet.”

To check out my Twitterview, go to the Twitterviews page here.

I’d love your comments and feedback on my recent radio & Twitter interviews!

I had the pleasure of appearing on Rachel Whalley’s radio show this afternoon. Listen to the archived show HERE.

Rachel is a therapist and healer, and you can visit her website at http://www.fogtofire.com - thanks, Rachel!

Hello again!  For those of you in Western Washington, I hope you’ve been enjoying the glimpses of sunshine we’ve had the last couple weeks.  Do any of you ski?  I do…and I am excited about the snow reports I’m hearing today!  Here’s hoping it sticks around…the 40 degrees and rainy thing just doesn’t cut it when you want to use those season passes.

ABCs of LLCs - An Introduction

Many of you have been asking for more information on LLCs.  What are they?  How do they work?  What do *you* need to do if you have an LLC?  Over the next few weeks we’ll cover all these topics.  Today, though, we’ll start with a quick overview and some resources for LLC owners.

…click here to read more

Hello again from busy, snowy Seattle!  It’s been far too long since I’ve posted a substantive article, so I promise to deliver one as soon as possible.

In the meantime, I wanted to let you all know that on Wednesday, February 25, 2009 between 8:00 a.m. and 9:00 a.m., I will be making my first official radio appearance since launching the firm!  The Seattle-based radio show Chat With Women is doing a series of features on female CEOs in the greater Seattle area, and they’ve done me the honor of highlighting me in this upcoming show!

Chat With Women broadcasts live Monday through Friday from 8:00 a.m. to 9:00 a.m. on KKNW 1150 AM in King County, Washington.  Please listen on the 25th and call in with your small business law questions!  And many thanks to Pam & Rochelle of the Chat With Women show for the opportunity to talk with their listeners about practicing small business law in Seattle!

Happy 2009! Thanks so much for showing interest my blog. I’d like to start my first “official” post of the New Year by asking for continued feedback and suggestions – this blog is about YOU, so I need you to tell me how I can make it better! What would you like to see here? Feel free to leave your ideas and thoughts in the comments section, or to e-mail me at valerie@farrislawpllc.com.

On to today’s topic. In the last two blog posts, I shared some thoughts on how to know when, as an individual or small businessperson, you need a lawyer. The bottom line is this: get one when you don’t need one, so you have one you like when you do. The next logical question, then, is “How do I choose the right lawyer for me or my business?”

…click here to read more

The interview below appeared in Sandra Watson’s blog, titled “Bridetiquette” today.  Check out Sandra’s blog and website - she’s a fabulous event planner who can help you with anything from a business event to a wedding!  And, stay tuned for a future guest blog post from Sandra right here, telling you all about her event planning services and how they can be of use to small business owners.

…click here to read more