Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 01-30-2014, 01:52 PM
Junior Member
 
Join Date: Jan 2014
Posts: 2
Can I deduct expenses of home remodel because I have a roommate

Hi All,
I purchased a new home this past September and have a roommate living with me paying $450 / month. Since moving in I have spent about $25k on remodeling the home. A lot of this has been on a new AC, furnace, windows, washer / dryer, flooring and paint to name the big ones. My question is if I claim the roommates rent as income can I also deduct a percentage of this $25k? Or get depreciation on the home? I don't know if it matters or not but in the long run (maybe a year out) I plan on turning this into a rental house completely and moving out myself. I am not sure if this is even possible but if it is I then plan to take my info to a tax professional since it will make my return a little more complicated but if it is absolutely not possible I will do the return myself.

Thanks for any help!
Andrew



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 01-30-2014, 04:00 PM
Moderator
 
Join Date: Oct 2010
Posts: 5,258
Quote:
Originally Posted by ammosman View Post


#1;I purchased a new home this past September and have a roommate living with me paying $450 / month. Since moving in I have spent about $25k on remodeling the home. A lot of this has been on a new AC, furnace, windows, washer / dryer, flooring and paint to name the big ones. My question is if I claim the roommates rent as income can I also deduct a percentage of this $25k?




#2;Or get depreciation on the home? I don't know if it matters or not but in the long run (maybe a year out) I plan on turning this into a rental house completely and moving out myself. I am not sure if this is even possible but if it is I then plan to take my info to a tax professional since it will make my return a little more complicated but if it is absolutely not possible I will do the return myself.


Andrew
#1;Every time you spend any money to improve the property, you can write it off, either as an expense in the year it was made or proportionally, over the improvement's useful life. The improvement may generate increased rents or result in decreased vacancy or both and will likely increase the property's value. When you go to sell the property at a higher price, you will pay lower taxes on the profit than you will on your ordinary income. Any improvement with a useful life of more than one year that is subject to wearing out or becoming obsolete can be depreciated. Depreciation is a method of recovering business costs over time. On a rental property, the building itself is depreciable, as are each of the improvements. Several depreciation methods can be used, but the most common is the straight-line depreciation system. Under this method, a building is depreciated over 27.5 years. Each component that was separately improved is also depreciated over its own time frame. The IRS provides a list of improvement classes with its assessment of useful life duration. Appliances, for instance, are assigned a five-year depreciation under this system. If the appliance cost $500, you would show a $100 expense for its depreciation each year for five years. The IRS allows you to write off every expense associated with your rental property that is both ordinary and necessary to run your rental business. It explicitly includes advertising, cleaning, commissions, insurance, mortgage interest, repairs, tax return preparation fees, travel expenses, utilities and postage. Just because an expense is not listed in one of the IRS' publications does not mean you cannot claim it. Rather, you must document the expense and be prepared to make your case should you be audited. Claiming expenses is easy. Proving them takes some degree of organization and discipline. Keep records. You might need to show them to prospective buyers, who may ask to see your documents to verify new improvements are truly new and to determine what likely maintenance costs are. You might also need the documents to prepare your taxes. You are required to prove every expense you claim, and if you're audited and can't do it, expect a truckload of problems that could extend back into prior tax years and forward into the future. The IRS points out that federal law does not specify the type of records required but, rather, expects records to clearly demonstrate both income and expenses



#2;As mentioned above.



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
  #3 (permalink)  
Old 01-30-2014, 04:05 PM
Junior Member
 
Join Date: Jan 2014
Posts: 2
Thanks for the reply Wnhough! Since I am currently living in the home as well do I only get to claim 50% of these expenses since the home is shared between the two of us?



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
  #4 (permalink)  
Old 01-30-2014, 04:18 PM
Moderator
 
Join Date: Oct 2010
Posts: 5,258
Correct; you can deduct rental exp on SCh E of 1040 while you still need to deduct personal use house exp,i.e. mortgage interes,r/e tax or etc on Sch A of 1040.however, for p ersonal home case, The IRS considers repairs and renovations on your personal residence to be personal expenditures, not business expenditures. So unless special circumstances apply, such as the use of part of your home for business/rental/investment or etrc purposes ,you cannot take a current-year tax deduction for maintenance costs and renovations on your personal residence. Wheyou dispose of it later,you must recapture the unrecp depfre as ordinary income taxed at 25% if your marginal tax rate is at 25% or higher as long as you have taxable LTCG.



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



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
Set up S Corp to deduct education expenses? Rainsandrains S-Corporation 2 06-27-2013 05:22 PM
where to depreciate home office remodel? recordingboy Depreciation 1 03-16-2010 12:45 PM
Work related expenses-what can I deduct? ctharden Itemized Deductions 0 12-21-2009 01:15 PM
how far must my old home be to the new home in order to deduct moving exp's? Allard Miscellaneous 1 06-14-2007 12:24 PM
What can a Taxpayer deduct for moving expenses? Tanya Miscellaneous 1 02-19-2007 01:02 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
 
 
 

» Recent Tax Q&A
No Threads to Display.