Can We Deduct Business Expense Prior To Sale Of Home
My husband and I purchased our first home to flip in October of 2005. We also purchased a van and a lot of tools and equipment in 2005 which we will use in the rehab of this and future property. Can we deduct the cost of the van, and tools in 2005?
No, you can not deduct the costs of a van and tools. These are capital assets and need to be capitalized. You take a depreciation expense over the asset life.
Since you are rehabbing to flip, please note that none of your rehab costs or holding costs are deductions either. You capitalize these costs by adding them to your cost basis. When you sell, these costs are part of the "cost of goods sold".
Consult your CPA for specific details.
I thought that tools under $500 could be deducted as expenses of the business?