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Old 02-02-2017, 06:35 PM
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Improvement Deductions

I own a two family home. I live in the lower unit and rent the upper unit. I work and get a W2.

In 2016 I remodeled the bathroom/kitchen in the upper unit to the tune of ~$40K.

My question is can I deduct this expense without capitalizing it? Can I deduct it 100%? If the deduction takes to paying zero taxes is there carryover to 2017?

Thanks.

Len



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Old 02-02-2017, 06:52 PM
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My question is can I deduct this expense without capitalizing it?===>I do not think so; The general rule is that the cost of ?repairs? incurred to maintain your rental properties may be deducted from each property?s taxable income in a given year. However, some repairs are considered ?improvements? in which you?re not allowed to deduct the entire expense immediately.

Can I deduct it 100%?====>As said no.

If the deduction takes to paying zero taxes is there carryover to 2017?==>Yes; I mean, unless you are a real estate professional,
the IRS considers real estate investment a passive activity
When your losses exceed the maximum amount established by the IRS for a passive loss, you can carry over the excess loss forward to the next tax year. You can then continue to carry forward these losses until you sell your property or use the entire amount of the loss carried forward to offset other passive income. You can also use carryover losses to offset the gains from ultimately selling your property. Carefully keep track of your loss carryover so that you can use the loss should you decide to place your property on the market. If you actively participated in real estate -- for example, you owned and managed a rental property -- you can deduct up to $25K of your passive real estate losses against your regular taxable income. This special $25K allowance decreases by 50 percent of the amount of your modified adjusted gross income that exceeds $100K. It disappears completely if your MAGI exceeds $150K.



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