All Forum Posts by: Jerald Sander

A new post on TurboTax in reply to my question states that property tax and mortgage interest are not an exception and must be included in start-up costs when the property is available for rent.  Apparently there are different interpretations, but I've seen this one more than the expense-now position.  Here's the other post:

 I am in disagreement with xxxxx

When it comes to long term residential rental real estate, any and all expenses incurred before the property was "available for rent" are just flat out not deductible at all. (do not confuse this with property improvements.) This especially includes those expenses incurred in preparing the property for rent, for that *very* *first* *time* and does not include expenses incurred during vacant periods between renters.

IRS Publication 527 has no allowance for expenses incurred before the property was available for rent. So for rental property there is no such thing as start-up expenses.

Now property improvements are a different story. A property improvement adds "real" value to the property, and it doesn't matter when that property improvement was done either. Property improvements done before the property was placed in service are entered in the Assets/Depreciation section and will have the same "in service" date as the property itself.

Property improvements completed after the property was converted to a rental are also entered in the assets/depreciation section. However, their in service date will be some date "after" the property was originally placed in service.

Long term residential rental real estate income is reported on SCH E with no exceptions. Yes, I said *NO* exceptions.

Thanks for the responses and  I apologize I didn't say so sooner.  I switched away from doing my taxes for a few days to focus on other life things, but am back now.   

This is the information I'd seen elsewhere (TurboTax forum) that made me think Property Taxes are not considered start-up costs and therefore not added to the capitalized basis.  Do you all agree or disagree with the following (I bolded the applicable text)?  If they are expense, and have to be entered to TurboTax as Deductions and Credits, that seems to take me back to the 1040 Schedule A Standard Deduction issue and losing the property tax deduction.  I sent the question back to the TurboTax forum also.  Thanks again for whatever clarification you can provide.   

May 31, 2019 9:29 PM.  All your expenses (except property taxes and mortgage interest if you have one) paid BEFORE the property was listed as available for rent are simply added to the cost of your rental property (in your records). No additional entry TurboTax is required. This includes your "closing" expenses, such as appraisal costs, fire insurance, as well as your repair costs. The total amount is called adjusted basis (not just the cost, but the cost plus all your pre-rental expenses).

Once the property is available for rent, you may start depreciating the rental property and use the "adjusted basis" in the Sale of Property/Depreciation section. You can deduct your property taxes and mortgage interest, in the Deductions & Credits section, for pre-rental time frame. Once the rental is available, they are your rental expenses.

Purchased a house in 2019 but the rehab / start-up carried into 2020 before being ready to rent.  I understand most of what I've read about capitalizing start-up expenses and the $5000 rule.  I read somewhere, can't find it now, that previous year property taxes are deductible in that prior year (in my case 2019 taxes on 2019 1040).  So far Turbo Tax is resisting establishing this as a 2019 rental, which I understand.  If the property tax is deductible in 2019, does that push it to my personal 1040 Schedule A (itemized deductions), and out-of-luck if I take the standard deduction?  

I'm converting attic space to two bedrooms (hopefully) in north St. Louis County, and want to make sure I understand the ceiling height requirement for sloped ceilings.  Am seeing different information depending on where I look:  7' over 75% of the space that's at least 5' high; 6'8" over 50%; and other combinations.  If I go Section 8 (haven't decided yet), is there one set of Federal rules and does anyone know what they are?  Or can local offices set their own rules?  If not Section 8, do St. Louis County rules apply?  I'm getting the feeling some jurisdictions avoid putting rules in writing to allow latitude, and you just have to have an inspection and roll the dice.  Anyone have experience with this?  Thanks in advance.

Thanks for all of the responses and referrals, and sorry I didn't thank you sooner.  

Any recommendations for a St. Louis area property inspector (pre-closing)? Thanks.

Have any of you chosen to go the Series LLC route, or looked at it and decided against? I have one property (in my own name) and looking for more, so it's time for me to decide. Any advice, especially from a Missouri perspective, would be appreciated.

Hello to all of you! I'm trying to feel my way around the St. Louis market. The posts about municipalities and neighborhoods are very helpful, and now I'm hoping for advice on where a new investor can get the best deal on an SFR conventional mortgage. Specific banks or loan officers? I'd like to make that connection before I buy if possible. Would name-dropping (Joe said to talk to you) help? My credit rating is excellent. Hopefully someday I'll be able to answer others' questions and give back a little. I'm in your debt.

Got it.  Thanks.  I must just be talking to the wrong lenders.  

Rookie question: Traditional lenders say they'll only make a commercial loan for a SFR property because it isn't my primary residence. They'll do 20 year amortization with a 3 to 5 year payoff or at least a rate reset. I read BP posts about getting residential mortages and wonder how. Am I talking to the wrong lenders or saying the wrong words or ??? Thanks for the Real Estate Investing 101 lesson.