understanding what i can claim as tax right offs

[Kevin Macdonald]

I just purchased a house that was never completed. The house was framed up, put under roof/ windows, siding, windows but the inside was never finished. The inside is just bare studs (no insulation, plumbing, HVAC, ETC…). I bought the house one week before the end of the year. My only expenses for 2012 are all my closing costs, and a small amount of materials I purchased to fix a couple things on the property, plus I had to pay back the previous owner 6 months in property tax because they pre paid it for this year.
This new year I will be putting about a 100k more into the property to finish the house.
My question is this is my first investment property and I am not sure what I can write off and what I cant. Should I go to a professional tax accountant, or are some of the “turbo tax” type programs helpful in walking you through what you can right off. I am not trying to get greedy or do anything illegally but want what’s rightfully mine.

Any replies would be helpful.
Thanks

[Jon Holdman]

Most of what you spend is going to go into your basis for the property. The basis is the amount you paid, plus purchase costs, plus all the investments you are making into the property. If this becomes a rental, then most of what you spend prior to it being ready to rent gets added onto the basis. That increases the depreciation you take each year. Some items, such as carpets or applicances, have faster depreciation schedules than the 27.5 for the property itself. When you sell, or, if you sell right away if this is a fix and flip, your basis is what you subtract from the net amount from the sale to determine your gain. An additional twist is that if you hold this and take (or, should have taken but didn't) depreciation, the depreciation reduces your basis and increases your gain. And brings unrecaptured depreciation tax into play.

I think professional help is essential to minimizing taxes for real estate.