Newbie Needs Tax Help!
Hi all. I just started purchasing rental properties this year and as such am a bit uninformed as to the deductions I will be able to make come tax time. Right now I have a SF thats rented and am currently readying my second. Unfortunately, since I am only a wekend warrior I will not have my second unit rented until next year. I have spent a bit of monies on purchasing materials for the fix-ups and also have 2 mortgages for these two houses. Could anyone out there explain to me what kinds of deductions i will qualify for as well as any advice on things on might do differently next year to get a bigger tax break?
I hold a steady full time job and am not a full time investor (If that helps).
Thank you all for your input.
Quote:
On 2006-11-26 02:50, damelect wrote:
Hi all. I just started purchasing rental properties this year and as such am a bit uninformed as to the deductions I will be able to make come tax time. Right now I have a SF thats rented and am currently readying my second. Unfortunately, since I am only a wekend warrior I will not have my second unit rented until next year. I have spent a bit of monies on purchasing materials for the fix-ups and also have 2 mortgages for these two houses. Could anyone out there explain to me what kinds of deductions i will qualify for as well as any advice on things on might do differently next year to get a bigger tax break?
I hold a steady full time job and am not a full time investor (If that helps).
Thank you all for your input.
Assumuning you are incorporated or have an LLC, See
http://www.instantinc.us/pdf%20files/Real%20Estate%20Corporate%20Tax%20Organizer.pdf
for a basic list of deductions [ Edited by ctsee11 on Date 11/26/2006 ]
Newkid has summarized your situation very well. The fixup costs are added to your basis in the property and are depreciable over the life of the property, typically 27.5 years, shorter for personal property.
Can fix up costs that are not capital improvements be added to the basis?
Can fix up costs that are not capital improvements be added to the basis?
What type of "Fix up" expenses?
Cleaning carpets, power washing house, change locks, plumbing repair, etc
I think I would rent it out to someone now and offset the repair costs.
Get a CPA ASAP to help you with this.
Additionally what about forming a business entity and maximizing your deductions?
[addsig]
Quote:
On 2006-11-28 19:54, SueJohnson wrote:
Cleaning carpets, power washing house, change locks, plumbing repair, etc
That is usually considered a maintenance deduction and is written off when you have the repairs.
Thinking about my above post, basis is actually all of the money you have invested in capital improvements. What I have described is deprecable basis, which is what you need to know for tax deductions on your existing rentals. The entire basis, minus recapture of part of the basis you have depreciated, is what you deduct from your sale price to figure profit, which it taxed at long term capital gains rates if you have owned the rental for over a year.
Looking at your original post, I might add that your second property started depreciating when you bought it, not when you first rent it out.
Chris