How to write off material cost for spec home builds

[Percy Greyson]

I am not sure which Forum Category to place this, please move it if needed!

Preface: I am in the midwest. Our median income is in the 45 to 50k range.  So in terms of numbers I am far from talking about million dollar homes.

I have five lots I purchased earlier this year. They are all similar lots that I figure I will just take the sum of the 5 lots price and split it by 5 when calculating the cost of the lots.

I do not have an LLC but am planning on forming one during the construction of the first home, probably smart to do it before the first home starts but that may not happen due to schedules. I already own many tools from building past homes and doing construction. I have an office in my home that I do a lot of research, emailing, ordering, book keeping, etc from.

Right now I have a few big questions that I can't seem to get answers for.  BP looks like the best source with people who are up to date on these topics.

1.) I know I need to form my LLC. I have one partner, my brother. He has no desire for the business side of work. He is into the physical work and does not want to learn how to do taxes or bookkeeping or really any of that. In fact, I typically do his taxes for him in trade for some help, but in the past he has always had a W2 job. This LLC I am starting is a new career for me and potentially him depending on how the first home works out. I am trying to figure out if I should make the LLC my own sole owner business or if it should be a partnership LLC. Which one will save on taxes, if at all? And secondly, which one will be less paperwork in combined hours? What I mean is if I continue to help him with his taxes, then just because I only do LLC taxes for myself that still means I am doing his own taxes as if he were an independent contractor. To me it sounds like partnership LLC may still be more tax work because even after the LLC settles the books, he and I still have our own 1040's to file showing the income from the LLC. Am I wrong in thinking this? I realize a single owner LLC is basically invisible to the IRS and that it's all done with the 1040 and schedule C for myself.

2.) What is the proper way to add materials I purchase for the home build to the cost basis of the home, especially if I buy them before a.) breaking ground or b.) a calendar year before the home is finished and sells? i.e. buying materials Spring 2019 but home isn't on market until late Spring of 2020? I feel like I am missing a certain tax form used for spec homes and I can't seem to figure out what form it is. It doesn't seem as simple as keeping receipts for the two calendar years and then adding those into the 'cost basis' of the home after it sells to determine profit? I am aware there are two different types of expense; expense in materials, and expense in things like hiring a sub-contractor, or paying builder's risk insurance or LLC liability insurance...

3.) Can I help lower my tax burden with tools I already own and store at home?

I feel like these should be three separate posts but they all sort of mingle together and I think future readers will benefit from all discussion.  I have not found a local CPA who is familiar with each variety of these questions and they seem to be more old-school as in not aggressive about finding tax savings the way this community seems to be.