Author Topic: Can I Deduct Tools Purchased for Rental Properties on Taxes?  (Read 6559 times)

Fred Tracy

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Can I Deduct Tools Purchased for Rental Properties on Taxes?
« on: August 28, 2014, 11:46:05 AM »
I've searched Google and this forum and can't seem to find a real answer. I just bought a bunch of tools (~$500 worth) including some saws and drills. The primary purpose of these tools will be to fix and maintain my one rental property (soon to be more..) but I will sometimes use it on my own house.

Can I actually deduct the money spent on these tools? Do I have to depreciate it over a certain amount of time? Do I need to work out a percentage of time that it was used in rental activity vs personal activity?

Just hoping I can get some tax benefit out of a relatively large purchase like that.

Thanks guys.

Cheddar Stacker

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Re: Can I Deduct Tools Purchased for Rental Properties on Taxes?
« Reply #1 on: August 28, 2014, 11:57:50 AM »
Yes.

Under $500/item there's not really any reason to depreciate, just take it all in the year of purchase.

Personal Use - technically you should only deduct the business portion, so you could apply a 10-50% personal use portion estimate and take that off the top before deducting it. Be sure to document this.

You're supposed to have a policy in place for these types of things, but if you're small time the IRS will likely not mess with you.

http://www.irs.gov/Businesses/Capitalization-v-Repairs-Audit-Technique-Guide

Fred Tracy

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Re: Can I Deduct Tools Purchased for Rental Properties on Taxes?
« Reply #2 on: August 28, 2014, 01:17:35 PM »
Yes.

Under $500/item there's not really any reason to depreciate, just take it all in the year of purchase.

Personal Use - technically you should only deduct the business portion, so you could apply a 10-50% personal use portion estimate and take that off the top before deducting it. Be sure to document this.

You're supposed to have a policy in place for these types of things, but if you're small time the IRS will likely not mess with you.

http://www.irs.gov/Businesses/Capitalization-v-Repairs-Audit-Technique-Guide

I have read about that. I think you're talking about the de minimis safe harbor thingy? I have created a document that says anything under $500 will be taken in the year it was purchased.

I actually bought the tools as a kit which was $555. Technically it's a single purchase, which as I understand means that since it's over $500 it will be subject to depreciation.

However... if I deduct 15% from it for personal use then suddenly it's under $500. I could deduct it at that point? Right? Or perhaps that's bending the rules...

Cheddar Stacker

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Re: Can I Deduct Tools Purchased for Rental Properties on Taxes?
« Reply #3 on: August 28, 2014, 01:22:18 PM »
I think it's fine. The worst thing that could possible happen is an IRS auditor tells you to move some expenses from 2014 to 2015-2018 and you pay them $100 that you get back over the next 4 years. Take your chances, it's too small to worry about (i.e.-de minimus).

viper155

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Re: Can I Deduct Tools Purchased for Rental Properties on Taxes?
« Reply #4 on: August 28, 2014, 01:46:30 PM »
You really should consult a CPA.

Cheddar Stacker

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Re: Can I Deduct Tools Purchased for Rental Properties on Taxes?
« Reply #5 on: August 28, 2014, 01:55:32 PM »
He just did Viper : )

There are many of us on the forum, including me. He's fine, particularly if he makes the business portion < $500 and has a written policy in place.

Fred Tracy

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Re: Can I Deduct Tools Purchased for Rental Properties on Taxes?
« Reply #6 on: August 29, 2014, 07:19:32 AM »
Thanks once again. I think I'm worrying about these little things too much. Little fish in a big pond, that's what I am. :)

arebelspy

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Re: Can I Deduct Tools Purchased for Rental Properties on Taxes?
« Reply #7 on: August 31, 2014, 09:40:03 PM »
You really should consult a CPA.

He just did Viper : )

Boom.

I laughed out loud.  :D
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Cheddar Stacker

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Re: Can I Deduct Tools Purchased for Rental Properties on Taxes?
« Reply #8 on: August 31, 2014, 09:44:55 PM »
You really should consult a CPA.

He just did Viper : )

Boom.

I laughed out loud.  :D

I'm glad you enjoyed that. I know I did. Hopefully viper was cool with my curt reply.

Also, I'm happy to help if anyone has any other tax questions, so fire away.

arebelspy

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Re: Can I Deduct Tools Purchased for Rental Properties on Taxes?
« Reply #9 on: August 31, 2014, 09:46:11 PM »
I'm glad you enjoyed that. I know I did. Hopefully viper was cool with my curt reply.

Also, I'm happy to help if anyone has any other tax questions, so fire away.

Great.  I'll send you my 2013 tax return and supporting documents.  My tax question is: Did my CPA miss anything?

Cheers!
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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Cheddar Stacker

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Re: Can I Deduct Tools Purchased for Rental Properties on Taxes?
« Reply #10 on: August 31, 2014, 09:49:37 PM »
I would gladly do that for you in exchange for some Real Estate mentoring. I have a lot to learn there.

arebelspy

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Re: Can I Deduct Tools Purchased for Rental Properties on Taxes?
« Reply #11 on: September 01, 2014, 09:27:21 AM »
I would gladly do that for you in exchange for some Real Estate mentoring. I have a lot to learn there.

Heh, I was kidding.  But I'm happy to answer any and all real estate stuff.  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
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fxsts12

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Re: Can I Deduct Tools Purchased for Rental Properties on Taxes?
« Reply #12 on: September 05, 2014, 05:26:52 PM »
Depreciate it without personal use. You never want to answer questions about out how much personal use for assets. That is a slippery slope in its own right.