What Can You Deduct? (Newbie Question)
2005 tax return was OK, but I feel I missed a few deductions (newbie). Besides the rehab cost, interest paid on loans, depreciation, etc. what is the lesser know write-offs for Landlords with normal day jobs? I understand my CPA should be giving me this info, but the one I used did not seem too knowledgeable regarding investment properties. I am switching to another one for this year but would like some suggestions for write-offs I have been missing.
For example: mileage on vehicle, home office write-offs, etc.. A good CPA should be able to give me this info; I just wanted some thoughts from the TCI crew. I do have a home office for the rentals, so I think all the supplies are a write-off. How about other things like a portion of the utility bill? Vehicle mileage is definitely one I am keeping track of this year.
Hi,
In many ways, Home Office depreciation is just not worth all the problems associated with it. It is a BIG red flag for the IRS (as the majority of people who take it do NOT qualify for it) and the amont of taxes recaptured with this deduction is minimal.
If you are a Landlord, I doubt you need the deduction anyway. I have been a landlord for 10 years, and after Property Depreciation and interest, I have never made a profit (on paper). Yet I have very nice positive cash flow.
Bruce
NewKid,
Thanks. Interestingly, I was actually writing the above post while you were, so I had not seen your response until after I posted. You clarify several important details in your 2nd response.
Now I am wondering specifics to this example :
1. Buy prop at 120K, not habitable. 3/05
2. Rehab: All sorts of needs: new roof, appliances, heatpump, in order to be habitable/insurable. 4-5/05
3. Include cosmetics: siding, landscaping, paint.
4. Make rental + refi (appraised 220K) 7/05
5. Taxes include depreciation schedules for each item individually? Total rehab cost at 27.5? OR ?
6. Rental is sold 7/06.... Cost basis is based on?
7. All depreciation is recaptured at 25%?
I hope you follow this one up for me. Meanwhile, once again, you have led me off to research the IRS site. smile
CE
"When you sell, your adjusted basis starts with your purchase price, is increased by the cost of any capital improvements or rehabs, and is decreased by the amount of depreciation allowed."
I thought that the 27.5 year depreciation was not deducted from the basis, but was taxed as unrecaptured depreciation? Am I incorrect?
Chris