Upland, CA · Member since 2013 · 42 posts · 5 votes
BP, I read somewhere that I could claim my real estate education as a tax deduction, but my tax accountant told me that is not true. (By my understanding ) - He said RE education can only be claimed if you are already employed in this field. I told him that I was REI, hence my 1 investment property. So, I paid for two gurus, and I also paid for the school to gain my RE agents license. He went on to explain that if I were an REA than I could claim this sort of education.
The other question: if you invest in updating your property say $10,000 how exactly can this be claimed; is it a percentage of each dollar? I'm completely clueless here and would really appreciate your help.
Larsen, WI · Member since 2013 · 45 posts · 7 votes
13y
On the property side:
Not an expert by any means, but typically repairs are generally directly deductable in the year you make them (if you convert to rental part way through the year you might only get partial credit). Where as improvments get added to the cost basis which is used to calculated the "depreciation" you must claim on the property each year (that offsets income) and gets used to calculated capital gains when you sell the property.
Start here on the IRS page for more info:
http://www.irs.gov/taxtopics/tc414.html
Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
13y
Property improvements are depreciated over their respective "class life" Personal property is 5 years. Land improvements 15 years. structure and structural components are 27.5 years.
These items are expensed over the class life as opposed to all in one year.
The tax savings is based upon your tax rate. This means if you are in the 25% bracket you will see $25 in savings for every $100 of expenses.