All Forum Posts by: Sharon D.

Quote from @Michael Plaks:

Quote from @Sharon D.:

Wrong. FAFSA will ask for your 2021 tax return, not 2022. Do an extension as my colleagues advised. 

I initially thought that I was amending the 2021 return, but now that I know I'm not, we can file the FAFSA!  Thanks!

Quote from @Linda Weygant:

Quote from @Sharon D.:

Quote from @Linda Weygant:

Quote from @Sharon D.:

We haven't filed 2022 taxes yet so at this point we haven't claimed any income on the property.  But we did have and will report 2022 income for the property, none in 2021.  

So we can't deduct any expenses from 2021?  Utilities, taxes, insurance? 

No, nothing to deduct in 2021.
However, you should add up all the expenses from 2021 and 2022 and include that as basis which is then depreciated (not deducted)

Thank you!

So just to clarify, to establish the cost basis, I take the price I paid for the property, plus the cost of any capital improvements made both while I lived in the home and after I moved out.  And then I also add the cost of regular maintenance and repairs for the time period between when I moved out and when the property was placed in service?

 Sort of.  You're about 90% there.

Step 1.  Figure your purchase basis.  This is going to be the amount paid for the property plus some of your closing costs.

Step 2.  Allocate part of the purchase basis to land.  This amount is never depreciated.  You'll need to use one of the acceptable methods for allocating land basis.

Step 3.  Add all the expenses from 2021 plus everything from 2022 up until you placed it in service.  This is going to be all expenses that would otherwise have been deductible - interest, property taxes, insurance, utilities, etc PLUS the amount for remodel.  This total amount will be depreciated.

When I prepare returns with this issue, I add the Step 3 amount in as a separate asset called "remodel" or something so that I can accurately trace how I calculated Building Basis, Land Basis and Remodel Basis later, in case it's needed.

 Thank you!  Yes, I included relevant closing costs and allocated part of the purchase basis to land. :)

Quote from @Linda Weygant:

Quote from @Sharon D.:

We haven't filed 2022 taxes yet so at this point we haven't claimed any income on the property.  But we did have and will report 2022 income for the property, none in 2021.  

So we can't deduct any expenses from 2021?  Utilities, taxes, insurance? 

No, nothing to deduct in 2021.
However, you should add up all the expenses from 2021 and 2022 and include that as basis which is then depreciated (not deducted)

Thank you!

So just to clarify, to establish the cost basis, I take the price I paid for the property, plus the cost of any capital improvements made both while I lived in the home and after I moved out.  And then I also add the cost of regular maintenance and repairs for the time period between when I moved out and when the property was placed in service?

Quote from @Linda Weygant:

TurboTax gets this one correct - nothing to report if it was not placed in service.

Sounds like your in-service date is December 2022, so all of your expenses up through that date must be DEPRECIATED (not deducted).

I know your normal tax pro is busy, but the very best thing for you to do is to put yourself on extension and then get with your current pro (if they are real estate savvy) or shop for a new pro after April 18.

 Can I depreciate expenses that would normally not be capitalized, like utilities, taxes, and insurance?

Is the in service date the same thing as the date of conversion?  I'm finding Turbotax articles that say the date of conversion is the day after you move out, and the date it is placed in service is the date you list it as available for rent.

Unfortunately I can't put this off because I have a kid who needs our tax info for the FAFSA...ASAP.

We haven't filed 2022 taxes yet so at this point we haven't claimed any income on the property.  But we did have and will report 2022 income for the property, none in 2021.  

So we can't deduct any expenses from 2021?  Utilities, taxes, insurance? 

We bought a home in 2016. Moved out in July of 2021 and started a very drawn out rehab project. Finally got the place listed as an STR in December of 2022 and have been booked solid ever since.

At what point do I start filing a Schedule E?  We've already filed 2021 taxes.  I thought I could amend to file a Schedule E and take a loss for 2021, but Turbotax says I can't file the schedule E because the property wasn't placed in service in 2021.  

Turbotax never asked for a date of conversion, so where does that come into play? 

Unfortunately the CPA we've worked with in the past is booked this month, so I'm trying to figure this out on my own. :)

Thanks for any help you can offer!

We spoke to a lender who said she doesn't pull business transcripts, just the personal transcripts.  We don't know yet how she will calculate our income.

Thanks, we have a call into a lender and are waiting to hear back.  However, we were hoping to make an offer today (hot market) so were looking for general input on whether or not this is likely to be feasible.

We're getting ready to make an offer on a property that will become our personal residence and have a couple of questions for mortgage pros.

Background: we are both employed through an S-corp that we set up at the end of 2018 and own 100%. Prior to forming the S-corp, my husband was a 1099 contractor in the same field with the same contracts.

The catch: the IRS bungled our original S-corp election and we are in the process of attempting to resolve this with them.  They currently have us down as a C-corp but (upon the advice of an IRS rep) we are continuing to file as an S-corp while we wait for them to make a determination regarding our corporate status.  Why this matters: we are unable to get transcripts of our corporate tax returns until this is all sorted out.

Question #1.  Will our inability to get transcripts of our corporate returns prevent us from getting a mortgage?  We can of course provide copies of the returns we submitted, plus any other documentation requested (bank statements?)  And we shouldn't have any problems getting transcripts of our personal returns.

Question #2. My husband cut way back on work last year in order to focus on finishing his MBA (graduated Jan 2020). As a result, our income took a huge dip. Something like $100k in 2018, $40k in 2019, and (projected) $100k in 2020. How will banks calculate our income? Will they be conservative and use our last tax return to calculate DTI? Will they average the last couple of years together? Will they take increased income YTD in 2020 into account?

We are hoping to get a rough idea how these two issues will affect our ability to get a loan before we make an offer. We're talking to a sweet old lady who is selling her childhood home FSBO--don't want to waste her time and tie up her property by making an offer only to have financing fall through.

Thanks for any insight you can offer!

Hi Whitney, my husband manages a roofing company in your area.  He says there was a hailstorm near 288 in May and insurance companies have been paying for a lot of roofs in the area.  If insurance buys the roof, you should only be out your deductible.  Definitely get a reputable roofer to come inspect the roof for hail damage.  You want a roofer who is knowledgeable about the insurance process and who can meet the insurance adjuster to point out any hail damage that is present. 

A good roof that meets windstorm specs is probably going to cost you more than $7.5k, but yeah, $30k is a bit ridiculous.  Again, if insurance covers the roof, you only have to pay your deductible, so it's worth a try.  Look for a company that's local, has good reviews, and has been around for a while (so you can count on them still being there if you need warranty work done down the road).  Message me if you want the name of my husband's company.