Claiming Expenses on SMF During Tax Season

[Brett Riemensnider]

Hello everyone! Question regarding my first rental property and taxes. I purchased my first rental property (4plex) back in July that’s taken a lot of expenses; down payment, inspection, repairs, rehabs, etc. 

From my understanding since it’s a rental property I could use this against my income during tax season. However it is a homestead loan so I’m wondering if that changes anything. I haven’t personally homesteaded yet due to how disgusting the place was and all the work/money that’s needed to be put into it to get it livable. 

Can I still claim this on my taxes? 75% of it is being rented so it is very much a rental property. Any info on how to handle taxes this season would be greatly appreciated. Thanks! 

[Aaron Zimmerman]

Adding to what Katie and Tim’s great comments. 

On the house hack, you can divide common expenses by square footage or bedrooms, whichever is more advantageous. 

Down payment is not deductible. However, you can depreciate your property once it’s placed in service. Placed in service date is when units were available to be rented. So if you have one unit advertised for rent on 6/1, another on 8/1, and another on 10/1, this will affect the depreciation  % on the tax return.

Repair vs capex: capex would typically include all costs prior to the property being placed in service INCLUDING mortgage interest, insurance, property taxes, utilities, etc. Repairs would generally be for costs <$2,500 using the de minimis safe harbor.