House Hacking & Taxes

[Alexandre Campino]

H all,

Question on house hacking, I bought my current property November 2020, at that point I purchased all appliances for the house along other necessities. Quite large expenses.

Since January 2021 I have been renting out 3 out of 4 rooms (75%). Now taxes come due, and I was wondering if I could use those large expenses of 2020 for my rental business that started in 2021, of course I never used those expenses as write-offs in my 2021 returns. 

If not, can I just use the accelerated depreciation of those assets? (fridge, washer, drier, etc).

Bonus question, I have a Gym in my home that my guests can make use of. When I posted the ad I included it as a perk and it was a major attractive for my current guests (corona and restrictions). I spent almost 20k in equipment for that gym. How can I use that as a Tax Write off?

Best, 

Alex

[Jake Wiley]

The short answer to your question is that you should "capitalize" the assets that have a larger dollar value, such as appliances.   There are safe harbor rules that generally allow you to write off assets up to $2,500 per invoice and up to $5,000.   However, it sounds like you will likely have more costs than that and it would be safer to capitalize and depreciate separately.    Same goes for the gym equipment if it is used for the business.   

https://www.irs.gov/businesses...

With that said, you could likely apply a Section 179 deduction to take the depreciation all in one year.  

https://www.nolo.com/legal-enc...

Since you are talking about some pretty significant deductions and you'll want to get this right.   If you are very well organized with receipts etc, it would be ideal to have a CPA or certified tax preparer do this for you, so you know it is done right.    It's not complicated, thus shouldn't cost you very much in exchange for the deductions/benefits you will get.