All Forum Posts by: David V.

This is a two part question

1) If I hire a painter to paint an entire inside of my rental house for lets say for $3,000 would this be considered a repair expense (improvement) that needs to be depreciated or would it be considered a) a maintenance expense or b) repair expense deducted in the year the painting was performed?    With this said, I do not qualify for the small taxpayer safe harbor for this property.   Additionally, how would the answer change if I paint more frequently?  For example, I usually do not paint every time a tenant moves out and am not sure if i would even paint more than two times in a ten year period to use the Routine Maintenance Safe Harbor Rule.   Oh (extra question) - if deemed a maintenance expense are these expenses always deductible in the year the maintenance was performed never depreciated?

2) Same question but only paint one or two rooms in a house.

Although I spent a few hours researching this topic online here I could not find my answer.  I would suspect this would be a common question since painting is one of the most common large expenses with rentals.  Oh - I did notice that in PUB 527 it allows you to deduct (not depreciate) painting if your tenant did the painting in lieu of two month rent.  See below.  Would this be a good example from the IRS that says you can deducting painting expenses?   

Any assistance would be much appreciated.

In PUB 527 - see below

Property or services. If you receive property or services as rent, instead of money, include the fair market value of the property or services in your rental income.

If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary.

Example. Your tenant is a house painter. He offers to paint your rental property instead of paying 2 months rent. You accept his offer.

Include in your rental income the amount the tenant would have paid for 2 months rent. You can deduct that same amount as a rental ex-pense for painting your property

hello, thanks for the comments. No - I did not use the proceeds to buy an additional property, However , I just read in IRS pub 936 that I may have a 90 day window to get financing after a cash purchase and still be able to deduct interest. I believe this is for non rentals but I would think it would apply to rentals, Hopefully one of the tax gurus in this forum will be able to shed more light on this. Thanks again for the feedback. I just recently joined this site and I am loving the wealth of information and the willingness of people like you to assist me and others on various issues.

I think I may have made a big rookie mistake. I recently purchased an investment property (a rental) for cash with the expectation of doing a cash out shortly thereafter. Couple months later I did the cash out. I assumed that I could deduct the expense on the cash out just like I could if I purchased with financing. However, I have read in a few places that I cannot deduct the interest in thus unless the loan was used for improvements. As such, I think I am out thousands of dollars on interest expense deductions. Is this true?

Thanks

Hi Steve,

Thanks you do much for your very quick response. I reviewed many of your prior posts prior to joining the site and have been impressed with your level of knowledge in the tax area. I do have a coupl eof follow uo questions though.

2) Do you know where on teh tax return the cash rebate is reflected to reduce the cost basis?

4) Your Response: As a landlord unless it is your trade or business, OR you qualify as a real estate professional you will not be required to issue 1099s as a landlord. Question: are the two above determinations different than deterining if I operate as an investor or a business. Although I work 40 hours a week for teh federal govt I actively manage my four properties, handling all matters. As such, I also paid a contrcator $3,000 in 2013 so are you saying taht I still do not need to file the 1099?

3 new questions.

1) Can software purchased for a small amount of $150 and in another instance $10 be deducted or shoud both be deprecaited over three years?

2) If a tax return is audited in one year (lets say 2012) and its a comprehsive audit and rental properties lets say were purchased a few years earlier - is checking the cost basis of the properties when purchased part of the 2012 audit or do they just focus on all transction in 2012 and assume cost basis and other transactions reflected on earlier tax returns were recorded correctly - assuming they have no reason to believe that fraud was committed - just a normal tax audit. I ask because mistakes in prior years obviously affect current year tax return.

3) Oh - i see you are a moderator in this forum. What does this exactly mean?

Thanks again.

I hope someday I will be able to contribute to this website :-)

hi there, thanks for the message. i found a free 2012 version online. i don't know how i got lucky :-) it looks very good. i will likely read the entire book within a few weeks

thanks again

http://media.wix.com/ugd/837e2b_1f51d2171dee6d1c01c526a75ba0983c.pdf

Hello everyone, i just signed up to Bigger Pockets tonight after about reviewing the sites content for about a month. Best site I have come across to date. With this said, I am fairly new to RE investing, I bought my first property in 2011 and three others since them. Although i consider myself financially savvy (CFA, MBA, 20 years in banking) taxes are not my thing. Although I have been using TurboTax and doing my taxes on my own after reading many discussions in this forum I have concluded that I have made mistakes on my taxes. As such, i would like to begin this discussion with several tax related questions on some topics I have not seen discussed and on a few others that I have seen discussed but further clarification would be helpful.

1) most important question (especially after reading many of the comments) Does anyone know a really good tax preparer specializing in rental properties in northern VA?

2) How is a cash rebate (reflected on HUd 1) from my realtor handled on an investment property i later rented out. My guess is that it reduces the cost basis of the property. However, i could not find anywhere on TurboTax to account for this in prior returns?

3) How do report insurance proceeds from a casualty event. I received $1,200 after a $500 deductible was met in 2013 from a flood in an adjacent townhome. The damage to my unit was minimal and i did not make any repairs. My guess is that the $1,200 reduces the cost basis o the property? Is this correct? What about the $500 deductible?

4) I believe I should have sent a 1099 in 2012. What should I do now?

5) I purchased a new HVAC in 2013. I believe this is depreciated over five years. Is this correct?

6) I bought a new laptop that i use for the rental business for $400. Since the amount is so low can i just expense it or do i need to depreciate it over 5 years?

7). I bought a washer/dryer after purchase and before tenant moved in. Is this depreciated over 7 years or is the entire amount capitalized over 27 1/2 years with all the other expenses?

8) i own property in another state but produce no income due to the higher deductible expenses. I did not file a State return in the first year 2011 but filed one in the second year despite no real estate related income. i just got worried and figured it was best to be conservative. But should i file a 2011 return for that state?

9) After i have read many of the comments in this forum i have concluded that in my 2011 and 2012 returns i did not capitalize various expenses prior to making my properties to rent. I intend on doing so or the one property i purchased in 2013 but i am thinking about amending both my 2011 and 2012 returns. The total amounts of what i expensed is maybe like $7000 for three properties and had i capitalized them i still would have had no taxable income. Oh - I also got cash rebates (on HUD 1) from my realtor which i ignored. As such, is it worth going through the hassle to amend the returns or is there another way to make the adjustments on my 2013 returns.

10) As i become more convinced i should get a tax preparer what would be a fair price for someone who has a regular job (W2 earner) with 4 properties and a few stock trades a year?

I hope my questions and any subsequent answers provide valuable advice to others on this site. I really love to learn new things so I am very excited to consume much content on this site.

Bests

Dave