Rental StartUp Expense of Current Home

[Sean Tong]

Hello Helpers, I am planning a move to FL next year May 2024, and thinking to convert my current home to rental. There are some things around current home that need to be fixed, and I have yet to set up a business LLC.

1) My intention is to capture these repairs as expense while I am currently still living in it for the next few months. Is this allowed? 

2) I own my house free and clear. Due to liability concern, should I just refinance the house to cash out, such that if liability arise , max I lose the house with debt and llc? Just like how an investor would buy my home with mortgage. 

Thank You

[Bill B.]

You don’t need an llc, it will do you almost zero if not zero good. 

No, you can’t deduct repair expenses while you’re living there. Those are household expenses not rental expenses. You can move out, list it as a rental, and then start fixing it up. Now it’s a rental expense  

I assume you have almost zero appreciation since you bought it? (Otherwise making that gain taxable may take you 5-10 years just to “break even.”)

If you were already living in Florida would you buy this property as a rental? If not, just sell and take the tax free money with you. If so, get your property manager lined up, your tax guy, etc etc.