Tax Deductions

[Jen Buchanan]

Hello All,

I started (in Oct.) with real estate investing and I haven't done any deals yet and I haven't registered a business entity, I've been getting doing training, have start up business costs, gone to seminars and spent money on real estate investing related items. My question is, can I still deduct my expenses on my tax return even though I don't legally and technically have a business registered?

Thanks

Jen

[Brandon Hall]

@Darlena Jones it's not that black and white, sorry.

@Jeff Cox is on the right track.

@Jen Buchanan the question that needs to be answered is: were you in business in 2015? 

Once you are in business, you can deduct those costs. Otherwise they are capitalized as start-up costs and deducted in the year in which you are considered to be in business.

Being in business depends on the facts and circumstances related to your business. A flipper or wholesaler will be "in business" when they have a property under contract. A landlord will be in business when their first property is advertised for rent.

So you don't need to earn money to be in business, but you need to be involved in your respective activity.

Additionally, the education expenses are most likely not deductible as they would be viewed as qualifying you for a new trade or business. Had you done  deal and then taken a seminar or a course, it would be a different story as you would have already been engaged in that trade or business and simply expanding upon your skills. Education that qualifies you for a new trade or business is not deductible.

Hope this helps.