Seeking advice on basic tax strategy

[Kyle Jenkins]

I currently have a condo in connecticut that i will be renting out in august. I am moving to a single family in texas. I am looking for advice on taxes from the basics. 

With this property going up for rent what are tax write off  examples?

When is it worth keeping track of all my possible write offs when the standard deduction is $20k?

Is my rental income taxed?

[Brian Schmelzlen]

Originally posted by @Kyle Jenkins:

Okay great info! right now i am "repairing" the condo. Can i claim these expenses if it is not a rental property yet?

If i do my own work can i pay myself and claim that labor?

Can this just be a notebook with dated notes and a folder of reciepts?

Hi Kyle,

There are "in service" rules, as well as repair/capitalization regulations that impact this.  First, the repair regulations.  In general, every "repair" expenditure needs to be capitalized (treated as an asset rather than an expense) and depreciated- expensed- over a number of years; how long depends on the life of the asset).  However, there are 3 "safe harbors" that can allow you to expense the "repair" immediately.  I am going to over-simplify all of them, talk to your CPA for more info.  The first is the de minimis safe harbor.  If the repair is less than $2,500, you can expense it immediately.  The second is the small taxpayer safe harbor.  Basically, if all of the work done on the property is less than a threshold amount, you can deduct it all.  The third is the routine maintenance safe harbor.  Essentially, if you can reasonably expect to make a similar repair within the useful life of the asset (not to exceed 10 years) you can deduct it.  Those are just the safe harbors; you can try to take the deduction without use of the safe harbors but the IRS may challenge it.

With the "in service rules" you need to have the property "in service" in order to take any deductions.  Essentially, you have to be holding it out to rent in order to take any expenses on it.  There is reasonable debate among CPAs about when a property is in service, so you may get different opinions on that.  It can be somewhat subjective.  The bright line rule is if you are receiving rental income on the property, it is in service.  My opinion is that if you are actively trying to get it rented out then it is in service.  However, I know some CPAs take the position that if you are getting it into a condition to be rented out, and it is rented out that calendar year, then it was in service the whole time.

In regards to whether you can deduct your own labor, in general no.  You cannot deduct your own labor, unless you also pick up your own labor as income which you do not want to do.