Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 05-04-2011, 07:35 AM
Junior Member
 
Join Date: Feb 2011
Posts: 2
Improvement deduction question

We purchased a rental condo in Gulf Shores, AL and began to renovate it to prepare it for the rental season 2010. The BP spill hit in April 2010 and we were not able to rent it. Can we carry over our deductions for improvements to write off against future income for 2011? We did not deduct them on our 2010 taxes because we didn't have rental income.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 05-05-2011, 01:35 AM
Moderator
 
Join Date: Oct 2010
Posts: 5,227
“ Can we carry over our deductions for improvements to write off against future income for 2011?” “ We did not deduct them on our 2010 taxes because we didn't have rental income.”---->Yes you can; you need to report your rental loss on Sch E of 1040.you’re probably aware of the dreaded passive loss rules. If they applied to you in previous year(s), some or all of your rental real estate losses may be deferred (suspended) for tax purposes. You generally cannot deduct those suspended losses until you either have positive taxable passive rental income from your rental real estate activities or until you sell the rental condo that generated the losses in the first place. As those suddenly deductible losses are big enough, you might create or increase a 2010 NOL that you can then carry back to prior years or forward to future year(s), 2011, with tax-saving results.If you are an active participant, then you may deduct up to $25,000 of rental r/e losses from active and portfolio income.
As you can see,there's a big difference between improvements and repairs. The improvement expenses are not deductible on your tax return in the year they are incurred. They are considered capital expenditures and are added to the basis of your rental condo and must be depreciated over the condo’s useful lives defined by the IRS.For example, if the original depreciable cost of the condo is $250,000, then it’d generate depreciation of $5,455 per year ($150,000 / 27.5 years). You can carry over your depreciation deduction from form 4562 and list it on line 20 of Sch E.Improvements,i.e., additions to the structure, installing insulation , or modernizing a kitchen or etc. are actions that materially add to the value of the property or substantially prolong its life. The cost of repairs on your rental condo can be written off in the year you pay them. As you had no income in 2010, then you may not claim your repair costs on Schedule E on 2011 return. List the total of your expenses for repairs on Schedule E, line 14. Repairs,i.e., repainting, fixin leaks or replacing broken windows or etc. on the other hand, just keep the property in good operating condition.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Using Mortgage Interest Deduction instead of Student Loan Deduction MrGermyD Itemized Deductions 0 01-14-2011 11:20 PM
How is the deduction calculated in order for an employer to get a deduction? TaxGuru Alabama 0 07-13-2010 08:50 PM
Vehicle Purchase - Deduction Question MrJ71 Itemized Deductions 1 02-04-2009 10:34 PM
Health Insurance Deduction Question ubspromo S-Corporation 5 11-19-2007 11:40 PM
Is interest from credit card's deductible if funds used are for home improvement? Edmund Itemized Deductions 1 04-06-2007 12:31 PM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning