Q. I am planning to buy 2 rental properties, approximately $250,000 total. My wife and I both work full-time. Does owning 2 rental properties qualify either one of us as a real estate professional so that we could get losses on these properties as tax deductions against our personal income.? If not, what can we do about these rental losses (mainly due to depreciation on the property). Thanks in advance.
A. You report your rental income and your rental expenses (interest, taxes, repairs, utilities, depreciated property & improvements).
If your expenses are more than your income, you have a loss and it is deducted from your taxable income.
You do not have to be a real estate professional to do this, just own the properties.
http://www.irs.gov/taxtopics/tc414.html
http://www.irs.gov/businesses/small/industries/article/0,,id=98895,00.html
http://taxes.about.com/od/taxhelp/a/Schedule_E.htm
http://taxes.about.com/od/income/qt/Schedule_E.htm
If your expenses are more than your income, you have a loss and it is deducted from your taxable income.
You do not have to be a real estate professional to do this, just own the properties.
http://www.irs.gov/taxtopics/tc414.html
http://www.irs.gov/businesses/small/industries/article/0,,id=98895,00.html
http://taxes.about.com/od/taxhelp/a/Schedule_E.htm
http://taxes.about.com/od/income/qt/Schedule_E.htm
No rental income this year, will I still be able to claim repair cost for tax deduction?
Q. I bought a rental condo (foreclosed property) in October, 2009 and will spend November and December to fix it up, so basically I don't have any rental income this year. I wonder if I am able to claim the repair cost (~$5,000) for tax deduction.
A. I agree somewhat with CPA Guy, but to me, your repairs seem to be part of an improvement process. By that, I mean that everything taken as a whole is a capital improvement even if some of the parts are usually considered repairs. For example, painting a wall is usually a repair, but when you paint a wall after moving it, then the painting is considered as part of a capital improvement project. Without knowing the price, condition, and what work you are doing, I'm guessing, but to me $5,000 sounds like capital improvements.
Depreciation on the condo doesn't start until it is available for renting. That means the day somebody could move into it.
A place to start for you to understand the tax implications is IRS Publication 527, available on the IRS web site at http://www.irs.gov/pub/irs-pdf/p527.pdf
If you are still confused, you should consider seeing a local tax professional before the end of this year. Take a copy of your 2008 tax return with you.
I hope this helps.
Gary
Addendum:
If the work you are doing is to make the home usable as a rental property, then not only should you capitalize those expenditures but also any interest paid on a loan until the home is ready for occupancy.
Depreciation on the condo doesn't start until it is available for renting. That means the day somebody could move into it.
A place to start for you to understand the tax implications is IRS Publication 527, available on the IRS web site at http://www.irs.gov/pub/irs-pdf/p527.pdf
If you are still confused, you should consider seeing a local tax professional before the end of this year. Take a copy of your 2008 tax return with you.
I hope this helps.
Gary
Addendum:
If the work you are doing is to make the home usable as a rental property, then not only should you capitalize those expenditures but also any interest paid on a loan until the home is ready for occupancy.
When I rent my house, how will this change my tax deductions and how do I make it rental property?
Q. Hello answerers. I will be moving out of the house I own to move in with my girlfriend. I would like to rent my property.
Can I still deduct mortgage insurance, PMI, and real estate taxes? Also, I have to claim the rental income on my taxes, correct? Is there any other type of form necessary to change my house from a "Primary Residence" to a "Rental Property"? Thanks in advance.
Can I still deduct mortgage insurance, PMI, and real estate taxes? Also, I have to claim the rental income on my taxes, correct? Is there any other type of form necessary to change my house from a "Primary Residence" to a "Rental Property"? Thanks in advance.
A. You can still deduct all of those items. However, you deduct them on a different form. Rental income and deductions are reported on Schedule E instead of Schedule A.
Also, you deduct "depreciation" (this is a nice one). You should have an appraisal done to determine the value of the property when you convert it. The basis for depreciation purposes is the lower of the cost (plus improvements) or the fair market value at the time of the conversion less the value of the land.
If you have never used a tax professional before, you should now. Getting rental property set up correctly the first year can be very tricky.
Also, you deduct "depreciation" (this is a nice one). You should have an appraisal done to determine the value of the property when you convert it. The basis for depreciation purposes is the lower of the cost (plus improvements) or the fair market value at the time of the conversion less the value of the land.
If you have never used a tax professional before, you should now. Getting rental property set up correctly the first year can be very tricky.
Rental Tax Deduction?: Cutting Down Dead Trees from the Property?
Q. I own a rental property and have three dead trees on it.
My neighbor is concerned they will fall on his house.
Can I pay a professional to cut then down (and possibly remove the stumps) and write this service off as a tax deduction?
My neighbor is concerned they will fall on his house.
Can I pay a professional to cut then down (and possibly remove the stumps) and write this service off as a tax deduction?
A. Yes you can.
Maintenance on your rental like this is a reasonable expense. It is no different than fixing plumbing or other faults with the property.
Maintenance on your rental like this is a reasonable expense. It is no different than fixing plumbing or other faults with the property.
Powered by Yahoo! Answers
No comments:
Post a Comment