All Forum Posts by: James Quillen

I am house hacking so the building is my primary residence. The water heater is on its way out.

What are the rules for taking de diminimis for a piece of equipment that also offers a tax credit? Am I allowed to deduct the percentage of the purchase price for the rented part of the house from my taxes under de minimis and claim the full tax credit as well since it is my primary residence? 

Quote from @Natalie Kolodij:

There are very few times you will be able to write off a roof on either safe harbor, but for tools the $2,500 limit will work

Natalie, thanks for the help.

Regardless of the limit for a safe harbor, if an item or repair exceeds the maximum for the safe harbor does that mean the safe harbor cannot be used? If a water heater is $3,000 and is a single item, can $2,500 be deducted and the remaining $500 not, or can none of it be deducted because the single item exceeded $2,500?

Quote from @James Quillen:

I would like to ask for others to check my math here.

I will be househacking. For ease of example, we'll say I will be living in 33% of the house while the other 66% is for rent. When calculating my basis, let's use an example of the purchase price being $400,000 and I've figure the land is worth $100,000 and the structure is worth $300,000.

My questions are: 

1) Will my basis be $200,000 (66% of $300,000) for depreciation purposes?

2) Will my SHST annual limit be $4,000 (2% of $200,000)?

Thank you for the help.

I just reread the SHST section and see that the SHST is worth the unadjusted basis. So question number two is answered.

That still leaves my math for the depreciation basis.

Quote from @Natalie Kolodij:

Anything under $2,500 can be written fof under the deminimus safe harbor 

And that's per item, correct? 

But if I do elect to use deminimus, I cannot use SHST, right?

And related to SHST, let's say the maximum is $10,000. If a new roof costs $12,000, am I allowed to claim $10,000 and just eat the remaining $2,000 or does an expense/invoice have to be less than the maximum? I'm house hacking so I'm guessing I can only claim the percentage of the space I'm renting.

I would like to ask for others to check my math here.

I will be househacking. For ease of example, we'll say I will be living in 33% of the house while the other 66% is for rent. When calculating my basis, let's use an example of the purchase price being $400,000 and I've figure the land is worth $100,000 and the structure is worth $300,000.

My questions are: 

1) Will my basis be $200,000 (66% of $300,000) for depreciation purposes?

2) Will my SHST annual limit be $4,000 (2% of $200,000)?

Thank you for the help.

I've bought a property and I'm getting it ready to rent. I have not publicized it as available, so I'm not operating under the safe havens.

How are hand tools deducted (if at all)? While I understand major equipment is depreciated or deducted with a safe haven when applicable, I haven't seen anything in the books I'm reading about hand tools. I just had to buy a set of channel lock pliers and a drain snake to repair a blocked sink drain. I know these tools will last more than one year. I know I will need to buy more tools before the property is put into service. 

Can this and future tools purchased prior to the property being put in service be deducted under start up costs? In the NOLO "Every Landlord's Tax Deduction Guide" an example lists "Repairs" as a start up cost but doesn't go into much more detail. I will deduct the parts to fix the sink, but what about the tools?

Same for tools after the property is put into service. Can I deduct them under one of the safe havens? If I max out a safe haven, will I need to depreciate tools, regardless of how little they cost?

John and Joe, thanks for the responses.

The living space distribution is more 66% tenant space / 33% owner space, so I understand that if I do depreciation I'll use those percentages.

As an example for deductions, one of the first things I'm doing is getting a new roof. Is it fair to write off 66% of the expense? Same for a new hot water heater.

As for tools, if I buy masonry tools and mixes to repoint brick and make a patio and walkway repair, can I write those off in the same percentages? From what I've read, work on the land around a structure is not allowed to be written off. I have some tree work I'll be doing to clear limbs away from the roof. Is this work not a writeoff because it's not on the structure?

I'm trying to figure out the tax implications of the househacking method. I will be living in the basement of a property I just purchased and renting out the main house. Are there any differences from a tax perspective since I'm living in the house as well? My main foci are depreciation and my ability to write off tools and repairs used to repair and/or improve the property.