Revision To Tax Return
Hey Gang!
This is probably going to sound pretty stupid, but here goes:
I sold a property and made a sizeable profit. I put $XXX into rehabbing my incoming producing duplex/which is also my residence.
I took another portion of my initial profit and put it into rehabbing a pretty run down new investment property.
Both properties are in great shape now, and bringing postive cash flow.
Problem is, my tax retrun makes it look like I have very low income, especially since I had lots of big expenses and I am self-employed.
Here's the question: I claimed the rehabbing costs for the investment property, but not the duplex/residence, figuring I live here....
Now that I can't get the equity line I was hoping to get, I'm thinking I ought to at least go tidy up my tax return and wait a couple years until it looks better.
Should I go back and file an addendum (or whatever those things are called) to my tax return and make sure I claim the repairs on my duplex/residence as investment property expenses, or will that be flagging my return for the IRS - or am I a dead duck anyway? I filed in May/June.
All opinoions grately appreciated.
Marlene
Generally speaking, rehab costs are capital improvements and must be capitalized -- even for rental property. You recover the cost of the improvements by taking a depreciation expense.
At this point, it is best for you to consult a professional tax advisor/preparer who will have access to your complete records.
Only then, will you be able to receive an informed opinion on the next action to take.
I totally agree with Dave T. Rehabing costs should be depreciated over time. You need to get an CPA who understands RT. You will be surprised that not many do.
Thanks for responding. I have been looking for a CPA who is knowledgeable about RE, but am having difficulty.
I thought I found one a couple weeks ago, but when she showed up, her $95 per hour fee jumped to $800 for a simple tax return.
Where can I find a reasonably priced, RE knoweldgeable CPA in San Diego?