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.
What is the US Tax Bracket for income ($16.500) from US rental property owned by a nonresident?
Q. Hello,
I own two rental properties in FL, and want to know in advance an estimate of how much I´ll pay in taxes.
What is the US tax bracket for income ($16.500) from US rental property income owned by a nonresident? (I do not live in the US)
And,
Can I deduct the condo´s monthly dues or their property tax?
Any other deductions possible?
Thank you in advance for your help!
I own two rental properties in FL, and want to know in advance an estimate of how much I´ll pay in taxes.
What is the US tax bracket for income ($16.500) from US rental property income owned by a nonresident? (I do not live in the US)
And,
Can I deduct the condo´s monthly dues or their property tax?
Any other deductions possible?
Thank you in advance for your help!
A. If you make no election to have the property taxed as being effectively connected, the tax rate is a flat 30% of your rental income and your renters (or management company) are required by law to withhold the tax and send it in for you. If that's done, you don't have to file a federal return until the year you sell.
In order to deduct expenses and depreciation, you must first make an election (that is difficult to undo), then file the next return filing 1040NR with schedule E. The tax rate would then be graduated, but keep in mind that when you sell, the depreciation is recaptured.
In order to deduct expenses and depreciation, you must first make an election (that is difficult to undo), then file the next return filing 1040NR with schedule E. The tax rate would then be graduated, but keep in mind that when you sell, the depreciation is recaptured.
How do I select a financial adviser familiar with rental properties to explain the tax benefits?
Q. We are into our 401k, have a small stock selection, and am nearing the standard deduction when we itemize. We refi'ed a couple of years ago to a 15 year, 4.25% fixed, with at least 250k in equity. Last year, our income level even reduced our child tax credit, and we will be earning 17 percent more this year without overtime or bonuses calculated.
I don't want to withdraw money from our house, 401k, or stocks, but really want to lower our tax liabilities.
Would a rental property be the best method to utilize our increased income, and also increase our net worth and reduce our tax liabilities?
Have you got a better idea, or tax solution? (Must be legal, and not involve giving my money to someone else to mismanage).
I don't want to withdraw money from our house, 401k, or stocks, but really want to lower our tax liabilities.
Would a rental property be the best method to utilize our increased income, and also increase our net worth and reduce our tax liabilities?
Have you got a better idea, or tax solution? (Must be legal, and not involve giving my money to someone else to mismanage).
A. I don't know if I would talk to a financial planner on this topic, however I would talk to a CPA on it. Depending on what your looking to do, I'm not sure if investment properties would be the route to take. If your looking for residual income, you might want to look into a triple tax free muni. It doesn't grow as fast as real estate, but it is safe in protecting your investment.
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