All Forum Posts by: Aaron Zimmerman

It is ultimately your choice. The reason to do this is the ability to roll-forward losses for when you sell. For instance, if you have $15k of losses built up and then sell 5 years down the line and have a $25k gain, you'll be able to offset the income partially with the losses. It depends on how big the losses are as well. Whatever you do one year, I'd recommend continuing to do it for future years. We see this with clients all the time and it's a very common situation. 

I would also recommend talking to an experienced CPA who knows the local taxes as well, in your instance. The above was meant for more general state advice. 

@Christopher Abele, seems like a pretty big project! The biggest thing to be aware of with your situation is that the asset isn't being placed into service (unless a tenant is living there). So, you'll want to keep track of your initial basis and then add in the repairs/improvements to your basis. I would recommend keeping track of items such as appliances and land improvements separately as those items have faster depreciation (and eligible for bonus depreciation)

Example: purchase price is $200k. Of that, 80% is building (depreciable); 20% is land. Therefore, $160k is depreciable, remaining 40k is not depreciable. Then, let's say you have an $100k rehab. That would also be eligible to be depreciated. 

The date you place your asset into service can be the date you first advertise for rental. You can not place the asset into service until then as you are still completing the rehab. 

I would definitely heed Scott's advise about getting/talking with a CPA. 

Definitely interested in any meetups! Also, for those that aren't in the local groups, feel free to PM and I can provide the links to those!

It should carryforward with whatever tax software you use, I would assume. At the firm I work at, we just roll the return from year to year. I'd probably say Turbotax is a good software to use. I would also be very sure that your basis is correct and building/land is allocated appropriately (and has some rationale for why you're doing it). 

You could also keep this on a simple excel sheet as well and just have one column that says Accumulated depreciation/amortization, then the current year amount, and end of year amount. 

Definitely adopt the policy. @Ashish Acharya has provided a nice summary for you. 

This policy also makes your bookkeeping easier because instead of keeping track of depreciation, it's just an expense. Further, it reduces the amount of depreciation recaptured upon sale. 

What you could do to potentially help out is to get passive gains to offset this income. In practice, what this means is either having a business that is profitable or for real estate, these could be cash cows with not a lot of depreciation benefits (think house that cost $50k-$75k and rent out for far greater than the 1% rule). I'm not sure if this aligns with your overall tax strategy, but this could be a good way to do so.

Otherwise, you could start putting properties in an LLC (multi-member, so you and your wife or other partners) and so long as you are active, you could deduct the losses up to basis. However, if you're passive, the same issue will be present (not deducting losses in the current year).

Certainly a lot to think about with 9 months in the year and see what links up with your overall tax/wealth strategy. 

How much income/loss do you have per tax for your two rental properties? Also, S-Corp is not recommended typically for owning properties. 

I second @Ashish Acharya's recommendation. Cheap is expensive. 

I was unfortunately not. My apologies for the delay in response.

It creates more of an administrative hassle to be honest. Then, you have to report capital gains. I'd do as Peter M suggested.