Author Topic: Tax Q.O.D. - Renting out bedrooms / converting to full rental  (Read 1064 times)

neo von retorch

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Tax Q.O.D. - Renting out bedrooms / converting to full rental
« on: January 23, 2015, 03:28:34 PM »
Purchased house in 2007
Rented out bedrooms to friends
Starting in 2014 rented out using Craigslist ads
In September 2014 moved out and rented out the final room

So my Tax Question Of the Day (Q.O.D.) is...
 - how do I split land/house value, and can I depreciate the home purchase? (FreeTaxUSA seemed to indicate that I can't?)
 - should I worry about the renting I did before September to my friend or just treat this as a new rental situation when I moved out?
 - is there better software than others for this kind of situation? (FreeTaxUSA was suggested elsewhere and seems to support it but maybe doesn't "baby" me enough)
 - assuming it's 100% rental property as of 9/12/2014 (it is!) I can deduct all utilities/internet paid at that location, yes?

I believe the rest should be pretty straight forward... three jobs, lots of rollovers and some early 2014 investment gains/losses. Plus Betterment tells me it did some Tax Loss Harvesting. In any of these cases, I should be mailed or provided digital downloads of the forms I need to enter and software should do its magic. But so far I haven't been able to demystify depreciation and am unclear about the rest of the personal/rental property delineation.

Thanks in advance if you have the time and inclination to help me learn and "do my own taxes" (albeit with much help from strangers and software).

ncornilsen

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Re: Tax Q.O.D. - Renting out bedrooms / converting to full rental
« Reply #1 on: January 23, 2015, 03:54:13 PM »
I am not an accountant, and would advise that you pay one to do your taxes, since rental situations add complications and there are a lot of ways to get in trouble.

But, You should be able to deduct all of those expenses. They will need to be prorated for the number of tenants at a given time... IE, If you lived there and had two rooms rented out, you would only be able to deduct 2/3 of costs.

Deductible costs include but are not limited to any repairs made, things purchased that were under the $500 de minimus rules, driving done to pick up materials and check the place out, renter screening costs, and depreciation.

For depreciation, you can only deduct the value of the structure, not of the land. What I did to figure out what my deductible structure value was, was to use the property tax assessment done most recent to when I converted to a rental. It had the value of the land, and the value of the structure. I calculated the percentage of the total assessed value that corresponded to the structure(s), and applied that to my house's purchase price + closing costs. Then you basically divide that value by 27.5 and get to claim it against your taxes each year.

If your MAGI is below 100K, you can claim losses on rental property up to 25,000 if you actively managed the property. I usually end up increasing my tax refund when I claim the rental income...

neo von retorch

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Re: Tax Q.O.D. - Renting out bedrooms / converting to full rental
« Reply #2 on: January 28, 2015, 03:03:13 PM »
Thanks - it does look like having an accountant would be worthwhile this year, with the long list of things I don't yet fully understand. Hopefully I can find one worth their fee in my area...