@Tomer O., Good advise on Turbo Tax as well as run it by a REI knowledgeable CPA in consultation.
The CPA visit should be planned late in the first year or definitely well before April 15!
The above caution on getting depreciation set up correctly is very good advise. The key to this is establishing how much the land value is, as a portion of your purchase price. My suggestion is to check your local county tax office. If not online, your can visit them for their split of land and improved property values. Save this determination in your tax records of the purchase for as long as you own the property! The improved property and a few items from closing can then be divided by the IRS' 27.5 year life to determine your yearly depreciation amount. Turbo Tax does this for you based on what you input for the land value and the sales price and closing items.
If the property you have bought, or are buying, was recently re-habed, your might be able to further consider the 5 and 15 year life items that are new or newly added. If you can get the receipts, and/or establish a written documentation of these with photos and sources in a "Cost Segregation Analysis" then take the total cost off your 27.5 year life property and add them back under the 5 year (flooring, rugs, light fixtures, appliances, etc>) or as 15 year property (landscaping, lawn sprinkling systems, patios, new driveways, etc.) Uncle Sam even allows a special added deduction for these type of rehab items and Turbo Tax can lead you through the calculations. Unfortunately your state may not allow this (SC does not :>(( ) but Turbo Tax handles this as well. You could easily owe the IRS zero in this case!
Take the time to learn how to do these, print out your return as you see it and run it by a good CPA in consultation. Now you are ready to buy more and you have new insights in what to look for in you next properties.
Cheers, Buddy
