Author Topic: taxes  (Read 2369 times)

PAstash

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taxes
« on: July 03, 2016, 02:47:07 AM »
I am about to purchase a duplex.

annual take home no OT 64k I usually tax defer 18.5k of this into a 457.

If I am living in half of the rental under what circumstances would I be able to write off repairs? when would I not be able to? what other tax specific write offs are there for land lords? where can I find detailed information about this? should I contact a CPA?

fishnfool

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Re: taxes
« Reply #1 on: July 03, 2016, 11:51:09 AM »
Yes you can write off your repairs, some major ones like a new roof would be deprecated,  not deducted all at one time. Many landlords would write off all repairs on the rental unit though it's not ethical... your call. ;)

  There are a lot of other things you will be able to write off such as property taxes, insurance,  some utilities,  some supplies and anything else used in the course of management the rental unit.

I would just keep track of all of your expenses and consult with a CPA around the end of the year. I think for now they would just advise you to save every item, document and purchase receipt until then. You may be able to write of some of the mortgage costs such as up front points and interest paid through the year.

Congrats on your new duplex, a great way to invest in real estate and get immediate rental return. Just learn to be handy and fix as much as possible yourself when things need repair.

Aloha

dandarc

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Re: taxes
« Reply #2 on: July 03, 2016, 11:58:19 AM »
Yes you can write off your repairs, some major ones like a new roof would be deprecated,  not deducted all at one time. Many landlords would write off all repairs on the rental unit though it's not ethical... your call. ;)
depreciated - although I like the idea of deprecating an old roof.  Suppose that's when you put the new shingles right over the top of the old ones?

PAstash

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Re: taxes
« Reply #3 on: July 03, 2016, 03:39:15 PM »
Yes you can write off your repairs, some major ones like a new roof would be deprecated,  not deducted all at one time. Many landlords would write off all repairs on the rental unit though it's not ethical... your call. ;)

  There are a lot of other things you will be able to write off such as property taxes, insurance,  some utilities,  some supplies and anything else used in the course of management the rental unit.

I would just keep track of all of your expenses and consult with a CPA around the end of the year. I think for now they would just advise you to save every item, document and purchase receipt until then. You may be able to write of some of the mortgage costs such as up front points and interest paid through the year.

Congrats on your new duplex, a great way to invest in real estate and get immediate rental return. Just learn to be handy and fix as much as possible yourself when things need repair.

Aloha

so i understand you... say i need to put on a new roof. at the end of the year it's installed i couldn't write off the entire amount just a small part of the cost each year?

writing off the points on the mortgage is that written in stone? is there stipulations to it?

why would it not be considered ethical towrite off all the repairs on the rental unit?

fishnfool

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Re: taxes
« Reply #4 on: July 03, 2016, 04:23:26 PM »
Yes you can write off your repairs, some major ones like a new roof would be deprecated,  not deducted all at one time. Many landlords would write off all repairs on the rental unit though it's not ethical... your call. ;)

  There are a lot of other things you will be able to write off such as property taxes, insurance,  some utilities,  some supplies and anything else used in the course of management the rental unit.

I would just keep track of all of your expenses and consult with a CPA around the end of the year. I think for now they would just advise you to save every item, document and purchase receipt until then. You may be able to write of some of the mortgage costs such as up front points and interest paid through the year.

Congrats on your new duplex, a great way to invest in real estate and get immediate rental return. Just learn to be handy and fix as much as possible yourself when things need repair.

Aloha

so i understand you... say i need to put on a new roof. at the end of the year it's installed i couldn't write off the entire amount just a small part of the cost each year?

writing off the points on the mortgage is that written in stone? is there stipulations to it?

why would it not be considered ethical towrite off all the repairs on the rental unit?
major repairs like a roof are depreciated over a 28 year period, not all at once. The CPA will advise you on that.

Mortgage points and interest is tax deductible. The CPA will probably suggest splitting that deduction between the rental unit and the one you live in...or not?

I was saying that some landlords write off repairs on their primary unit as being a rental expense. Say you remodel your side of the duplex but itemize it at being a rental expenses. It's one of those things that is often done and whose gonna know? Your call!

PAstash

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Re: taxes
« Reply #5 on: July 03, 2016, 08:50:46 PM »
any advice on how I could contact a good CPA?

How do you determine the amount you can write off? so I do the roof one year. In the same year I have all the office expenses. Along with some paint some small dry walling projects maybe have to replace an appliance. How much is written off instantly? what's my cap on this?

also thank you for all your help.
« Last Edit: July 03, 2016, 08:53:30 PM by PAstash »

fishnfool

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Re: taxes
« Reply #6 on: July 03, 2016, 09:56:26 PM »
any advice on how I could contact a good CPA?

How do you determine the amount you can write off? so I do the roof one year. In the same year I have all the office expenses. Along with some paint some small dry walling projects maybe have to replace an appliance. How much is written off instantly? what's my cap on this?

also thank you for all your help.
A referral from someone you know locally might be your best option on finding a CPA.

You don't have a cap or limit on how much is tax deductible. Just file everything you have a receipt for and log any expenses you might not have a receipt for. Like hiring a gardener or paying for a dump run etc. You might even show a loss some years if you have a lot to do on this duplex.

I always did my.own taxes before buying a rental. I've used a CPA for the last 15 years and have been happy to let them handle it. But for the most part, they're just putting in the numbers I give them. I'm thinking about giving turbo tax a try next year and saving $400 plus I'm paying now.

Something to consider if you are organized and have the time/patience, do it yourself.

PAstash

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Re: taxes
« Reply #7 on: July 04, 2016, 12:13:20 AM »
any advice on how I could contact a good CPA?

How do you determine the amount you can write off? so I do the roof one year. In the same year I have all the office expenses. Along with some paint some small dry walling projects maybe have to replace an appliance. How much is written off instantly? what's my cap on this?

also thank you for all your help.
A referral from someone you know locally might be your best option on finding a CPA.

You don't have a cap or limit on how much is tax deductible. Just file everything you have a receipt for and log any expenses you might not have a receipt for. Like hiring a gardener or paying for a dump run etc. You might even show a loss some years if you have a lot to do on this duplex.

I always did my.own taxes before buying a rental. I've used a CPA for the last 15 years and have been happy to let them handle it. But for the most part, they're just putting in the numbers I give them. I'm thinking about giving turbo tax a try next year and saving $400 plus I'm paying now.

Something to consider if you are organized and have the time/patience, do it yourself.

you have been extremely informative. Thank you for your time.

dpfromva

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Re: taxes
« Reply #8 on: July 05, 2016, 10:48:31 AM »
Are you in the US? If so, read this IRS publication, it's pretty plain English with examples (I've posted it before on another thread):
https://www.irs.gov/publications/p527/ch04.html#en_US_2015_publink1000219159

Here's an excerpt:

Renting Part of Property

If you rent part of your property, you must divide certain expenses between the part of the property used for rental purposes and the part of the property used for personal purposes, as though you actually had two separate pieces of property.

You can deduct the expenses related to the part of the property used for rental purposes, such as home mortgage interest, qualified mortgage insurance premiums, and real estate taxes, as rental expenses on Schedule E (Form 1040). You can also deduct as rental expenses a portion of other expenses that normally are nondeductible personal expenses, such as expenses for electricity or painting the outside of the house.   

There is no change in the types of expenses deductible for the personal-use part of your property. Generally, these expenses may be deducted only if you itemize your deductions on Schedule A (Form 1040).

You cannot deduct any part of the cost of the first phone line even if your tenants have unlimited use of it.

You do not have to divide the expenses that belong only to the rental part of your property. For example, if you paint a room that you rent or pay premiums for liability insurance in connection with renting a room in your home, your entire cost is a rental expense. If you install a second phone line strictly for your tenant's use, all the cost of the second line is deductible as a rental expense. You can deduct depreciation on the part of the house used for rental purposes as well as on the furniture and equipment you use for rental purposes.

How to divide expenses.   If an expense is for both rental use and personal use, such as mortgage interest or heat for the entire house, you must divide the expense between rental use and personal use. You can use any reasonable method for dividing the expense. It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. The two most common methods for dividing an expense are (1) the number of rooms in your home, and (2) the square footage of your home.


Example.

You rent a room in your house. The room is 12 15 feet, or 180 square feet. Your entire house has 1,800 square feet of floor space. You can deduct as a rental expense 10% of any expense that must be divided between rental use and personal use. If your heating bill for the year for the entire house was $600, $60 ($600 .10) is a rental expense. The balance, $540, is a personal expense that you cannot deduct.

Duplex.   A common situation is the duplex where you live in one unit and rent out the other. Certain expenses apply to the entire property, such as mortgage interest and real estate taxes, and must be split to determine rental and personal expenses.


Example.

You own a duplex and live in one half, renting the other half. Both units are approximately the same size. Last year, you paid a total of $10,000 mortgage interest and $2,000 real estate taxes for the entire property. You can deduct $5,000 mortgage interest and $1,000 real estate taxes on Schedule E (Form 1040). If you itemize your deductions, you can deduct the other $5,000 mortgage interest and $1,000 real estate taxes on Schedule A (Form 1040).

PAstash

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Re: taxes
« Reply #9 on: July 08, 2016, 01:08:17 PM »
Are you in the US? If so, read this IRS publication, it's pretty plain English with examples (I've posted it before on another thread):
https://www.irs.gov/publications/p527/ch04.html#en_US_2015_publink1000219159

Here's an excerpt:

Renting Part of Property

If you rent part of your property, you must divide certain expenses between the part of the property used for rental purposes and the part of the property used for personal purposes, as though you actually had two separate pieces of property.

You can deduct the expenses related to the part of the property used for rental purposes, such as home mortgage interest, qualified mortgage insurance premiums, and real estate taxes, as rental expenses on Schedule E (Form 1040). You can also deduct as rental expenses a portion of other expenses that normally are nondeductible personal expenses, such as expenses for electricity or painting the outside of the house.   

There is no change in the types of expenses deductible for the personal-use part of your property. Generally, these expenses may be deducted only if you itemize your deductions on Schedule A (Form 1040).

You cannot deduct any part of the cost of the first phone line even if your tenants have unlimited use of it.

You do not have to divide the expenses that belong only to the rental part of your property. For example, if you paint a room that you rent or pay premiums for liability insurance in connection with renting a room in your home, your entire cost is a rental expense. If you install a second phone line strictly for your tenant's use, all the cost of the second line is deductible as a rental expense. You can deduct depreciation on the part of the house used for rental purposes as well as on the furniture and equipment you use for rental purposes.

How to divide expenses.   If an expense is for both rental use and personal use, such as mortgage interest or heat for the entire house, you must divide the expense between rental use and personal use. You can use any reasonable method for dividing the expense. It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. The two most common methods for dividing an expense are (1) the number of rooms in your home, and (2) the square footage of your home.


Example.

You rent a room in your house. The room is 12 15 feet, or 180 square feet. Your entire house has 1,800 square feet of floor space. You can deduct as a rental expense 10% of any expense that must be divided between rental use and personal use. If your heating bill for the year for the entire house was $600, $60 ($600 .10) is a rental expense. The balance, $540, is a personal expense that you cannot deduct.

Duplex.   A common situation is the duplex where you live in one unit and rent out the other. Certain expenses apply to the entire property, such as mortgage interest and real estate taxes, and must be split to determine rental and personal expenses.


Example.

You own a duplex and live in one half, renting the other half. Both units are approximately the same size. Last year, you paid a total of $10,000 mortgage interest and $2,000 real estate taxes for the entire property. You can deduct $5,000 mortgage interest and $1,000 real estate taxes on Schedule E (Form 1040). If you itemize your deductions, you can deduct the other $5,000 mortgage interest and $1,000 real estate taxes on Schedule A (Form 1040).

thank you for this! it was exactly the type of info i was looking for.