Tax ?
Should you wait to buy materials to fix up a home before you close?
We will be closing on our first investment property in 2 weeks. If we came across a good deal on some materials to fix up the home, should we buy or wait.
If we buy before we close on the home, can you still deduct them off of your taxes to lower your capital gains tax.
Please let me know
Thanks
ncrehabber
If you come across a good deal on building materials that you could always use, even if the settlement on this property falls through, then go ahead. If you want to risk your capital, and the risk is within your tolerance, then go ahead.
It does not matter when you actually buy the materials. Normally, the cost of rehab (materials and contracted labor, but not your own time and labor) is added to the cost basis, reducing your taxable profit.
Consult your tax professional for specific details.
If it is small items and they are very inexpensive , then I probably would. But if you start collecting a bunch of large items and this deal falls through and your other investments end up not needing these items, then you will have a yard full of stuff you don't need, junk. I would suggest waiting until you get the house and only buying what you need for that project, unless you like to have garage sales.