House Hack - Tax Write-Off for Tools/Lawn care??

[Joe Livsey]

I am about to close on my first house hack investment, a duplex, using an FHA loan. There will be renters in one half and I'll live in the other. Having been a renter my whole adult life I own minimal tools and zero lawn care or snow removal equipment.

Since I will be a landlord and these products will be taking care of my investment property and tenants am I able to purchase and write off things like a lawn mower, weed wacker, basic handyman tool kits? These would be items necessary for the normal operation of my business. Could I take it a step further and have my half of the duplex, my primary residence, be considered my office where I conduct my business and things like paint or a home office set up be deducted?

I understand I should direct these to a qualified CPA to help with my tax planning and preparation. I am in the process of finding and vetting options at the moment, but while I'm doing this I would love to hear what others have done!

[Bobby Lee]

Hi Joe,

Yes it would be a tax deduction. But if you're also using it for personal use, then only the portion used for business (rental) would be deductible. If anything was purchased to fix the rental only, it's 100% deductible. If something was purchased to benefit both the rental and your primary residence, then you deduct the ratio of benefit to the rental. Typically you can calculate this by dividing your rental square footage by total square footage of both sides - and that's your ratio. This is the type of calculation you'd do if you repainted the whole place or resod the entire lawn.

As for your office, 50% of your home is too much office space. Think about it - you probably won't store supplies in your kitchen or bathrooms so you're saying you're using half your bedrooms and most of your living room? If you are then go for it, because if an audit comes around you can prove it.

Now I'm sure you can find CPAs that will give you 100% deduction no matter what and allow that 50% home office, but you're increasing your risk for audit. That being said, these same CPAs also know the IRS is understaffed so something like 1% of returns are being audited so they're willing to paint you a rosy picture about giving you tax deductions and large refunds to get your business. Just be aware and know your risk tolerance.