All Forum Posts by: Michael Moreno

Quote from @Jason Malabute:

Hi Michael,

I agree with Michael Plaks. For 2024, since the property is partly your residence, you can only depreciate the portion rented out, and no loss can be claimed. In 2025, once you move out and rent the entire property, you can start depreciating the whole house. Just ensure you keep track of when the property use changes.

 Thanks Jason! Also, if I bought a fridge, washer, and dryer, how do I expense these appliances? I want to expense them all the same year since they're each under $2,500 and depreciating them wouldn't really do me any good. Since I am renting my home out to two other renters, we each use these appliances equally. Does that mean I can expense these appliances by 66% (2/3) the same year? 

Hi everyone,

I own a 3-bedroom, 2-bath single-family residence that I purchased in September 2023. I currently rent out two of the guest rooms and am living in the rest of the house. I understand that I need to prorate my expenses based on the square footage that is being rented out.

However, I plan to move out soon and rent the entire house. Since I started renting out the house in May 2024 and will likely move out in 2025 after the leases for my current renters end, I have a question about depreciation.

Can I depreciate the portion of the house that was being used for personal use, even though I was living in the house for part of 2023? Specifically, am I able to depreciate the square footage I couldn't claim depreciation on from 2023 for the 2024 tax year, given that I couldn’t claim depreciation for that period?

Thank you for your guidance!

Quote from @Michael Plaks:

@Michael Moreno

On another thread that you started https://www.biggerpockets.com/forums/51/topics/1182951-seeki... I tried to tell you that house-hacking rooms will NOT create any loss on your tax return. Seems like my message did not register. No savvy/seasoned/magical CPA can change this rule for you.

Also, your request for CPAs to contact you essentially invites us to break the BiggerPockets rules. We are NOT allowed to contact you - publicly or privately - even after you post such a request. You must identify people you want to work with yourself and start the conversation from your end. 

Yes, some CPAs will contact you via PM regardless of the BP rules. Well, it's up to them to honor the rules. And up to you to choose to work with someone who ignores the rules.

Hi Michael,

I read your reply a while back about not having a loss in my return. I totally understood that just for the record.

Thanks for letting me know that CPA’s can’t reach out to me per BiggerPockets rules. I just haven’t had any luck locally with anyone so figured I’d reach out here. I’d rather have a CPA do my return since I am afraid I will screw up on prorating my expenses and get audited by the IRS.

Quote from @Basit Siddiqi:

House hacking makes your tax situation more complex.
You purchased a property that is treated as both an investment property and a personal residence. As such, payments that you make need to be prorated between business deductions and personal deductions.

Payments that you make normally fall into one of 3 buckets
100% of the payment can be factored in somewhere on the return
Partial payment can be factored somewhere on the return
0% of the payment can be factored in somewhere on the return

House-hacking also has considerable tax implications in the event that you want to sell this property.

You can potentially defer a portion or all of the gain on the investment property with 1031 exclusion.
You can potentially exclude a portion or all of the gain on the personal residence with section 121 exclusion.

Yes I have read about all the cons about house hacking. I am well aware about all the depreciation recapture, deductions on business use, etc. I am just looking to reach out to a CPA that can do my returns every year. I am afraid I might make a mistake on filing my return with prorating. 

Quote from @Nathan Gesner:

Quote from @Michael Moreno:

This is a pretty common scenario that I would think any CPA could handle.

@Natalie Kolodij or @Yonah Weiss?

Hi Nathan,

Thanks for the contacts, I will reach out to them. I have all the prorating and expense tracking ready so that I can make the CPA’s job easier. I heard they charge more for messy preparation. 
 

Hi everyone,

As I meticulously track my rental property expenses, I've come to realize the complexity involved in managing taxes independently. To ensure accuracy and compliance, I've decided to seek the expertise of a seasoned real estate CPA. Ideally, I'm looking for someone who shares my passion for the industry and possesses firsthand experience as a property owner.

My property, a 3-bedroom, 2-bathroom dwelling, serves as both my residence and a source of supplementary income through room rentals. I've already completed the meticulous tasks of prorating, square footage calculations, and expense tracking.

If you're a real estate CPA with a penchant for the field and a desire to forge a meaningful professional relationship, I'm eager to connect with you. Let's discuss how we can collaborate effectively. Thank you.

Quote from @Michael Plaks:

So you did not convert those room into rental until 2024? Then you start on 2024 return. Changing your 2023 return would not save you a single cent anyway.

Correct, I did not convert these rooms into rentals until 2024. Thanks for the help! 

Quote from @Benjamin Weinhart:

Quote from @Michael Plaks:

So you did not convert those room into rental until 2024? Then you start on 2024 return. Changing your 2023 return would not save you a single cent anyway.

 Agreed, it makes no difference taxable income-wise to supercede the return. The assets purchased would be considered "placed in service" in tax year 2024 and would therefore be able to be expensed/capitalized as applicable depending on the treatment of the assets.

 Thanks for this confirmation. I did read in the IRS tax code that expenses like furniture have to individually be less than $2,500 to be expensed instead of having to be capitalized. None of the individual furniture items I bought exceed $2,500. Therefore, I can expense these furniture items on Schedule E in the “Other Expenses” row correct?

Quote from @Michael Plaks:

@Michael Moreno

From your unclear story, I assume that you already filed your 2023 tax return which is due 4/15/2024.

You can - and should - file a corrected return. If you file it before 4/15, it is not even an "amended" return but a "superceding" return. It will simply overwrite your original return.

You can claim all the regular rental expenses that you mentioned. Just be aware that you cannot create a loss. You can only wipe out your 2023 rental income down to zero but not go below zero. The loss created by your deductions will be locked and pushed into future years.

So the thing is that I did not have any rental income for 2023. Would that end up being a loss that I carryover to this year? And yes, I already filed my 2023 tax return.  

Hi everyone,

I recently purchased my first single-family property in 09/08/2023 and converted two smaller rooms into rental units while occupying the principal room. I invested approximately $4,000 in furnishing these two rental rooms with linens, mattresses, bed frames, dressers, and nightstands. Although these items are eligible for tax deductions, I overlooked this aspect when filing my taxes last year.

Now that it's 2024, I'm wondering if it's possible to file an amended return to potentially recoup some money from the IRS. Given the timeline and the nature of these expenses, I'd appreciate any insights or advice from those familiar with tax regulations in such situations.

Additionally, I'd like to know if I can claim depreciation, mortgage interest, homeowner's insurance, utilities, HOA dues, and other expenses associated with the rental units of my home from 09/08/2023 to 12/31/2023. I overlooked including these details on Schedule E when I initially filed my taxes.

Any guidance on these matters would be greatly appreciated. Thank you in advance for your assistance!