Expence tracking without a Business?

[Gleb Dmitriyenko]

Hello,

I purchased my first house hack in Sacramento, CA recently, and I have some questions about tracking expenses.

What do I need to have to have in order to write off expenses as I am prepping the property for renters, adding features, and getting renters in?

I've been tracking all of my expenses using excel and Stessa which I really like. I do not have a registered business, and the property is considered my primary since I will be house hacking it. I know I am all over the place, but my main concerns are as follows:

1. Do I need to create and register a business with the government and if so what kind do I need for tax purposes/me needs?

2. I've been using capital from my W2 to fund the work on the property, can that apply to business expenses?

3. I do not at this time have "proof" that rooms will be rented out to tenants. Does that affect my strategy for tax planning?

[Eduardo Aguilar]

Hi @Gleb Dmitriyenko congratulations on purchasing your first house hack!!! So excited for you!!! I'll start by saying that I am not a tax professional and so would highly encourage you to connect with one in order to confirm or correct any of the advice offered here. 

That being said, if this is in fact a true house hack in which you are living in the home and renting out the rooms, your expenses on the repairs and getting the house ready will be seen  as simple improvements on your home which you can document via your existing tools (excel, etc). Since it's a primary residence, my sense is that you cannot necessarily treat it as a business and so do not need to go the route of registering it as such. 

Definitely will defer to others that have much more experience with this particular strategy but my sense is that for tax purposes you're simply benefitting from the ability to not have to put any (or as much) of your money towards mortgage and utilities. The perks of the house hack as part of your business strategy is that is frees up more of your capital by your renters taking care of the mortgage, to be able to save up and purchase your next investment property.

Hoping this helps and definitely wishing you the best!