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Rental "start-up" deduction info needed

5 posts by 2 users

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Silvia Barber

Feb 26 '10, 03:47 AM


I am still alittle confused about the $5000.00 allowed "start up deductions". Maybe someone here has the answers:
This will be the first home that I will rent out. I just bought it as an REO and am waiting for escrow to close.
I think that paint and basic repairs fall under this section BUT If I want to replace some carpet, replace stove and some light fixtures that are broken these do not seem to fall under the "start up" deductions (or am I wrong).
I have heard that you must advertise that the home is available in order for these things to be deemed "operating expenses". But how do you advertise that the home is available for rent, thus allowing you to take improvement depreciation, if it is not truely move-in ready? I'm confused. I can also afford to have the home vacant but I would like to get the best tax break available also. How do I to work through this? Thanks for any info.


Edited Jun 26 2010, 11:50


Mark Updegraff Donor

Developer from Rochester, New York

Feb 26 '10, 04:01 AM


Sylvia, I just went through this for the first time last year I STRONGLY recommend getting NOLO's Landlord's Tax deduction guide!!! It is very easy to follow and there is a lot that I can't regurg here.

To answer your specific questions - (if i remember correctly, which I think I do)
Start-up costs are for the period prior to signing a lease, after you sign a lease, no more "start up" costs.
Anything you purchase for the house that stays as part of the house gets depreciated. The length of depreciation depends on the type of item. Carpet is 5 years (i believe), things like lighting fixtures, cabinets, sinks, vanity, bath, toilets etc, get added to the basis of the house and depreciated over 30 years.

I STRONGLY SUGGEST READING NOLOS book!!!!
I can't stress it enough! even if you get a CPA to handle this in the future, it is good to have read, and understand!

Good luck!
Mark


Edited Jun 26 2010, 11:50


Medium_leavesMark Updegraff, Updegraff Development LLC
E-Mail: [email protected]
Telephone: (585) 666-3069
Website: http://www.UpdegraffDevelopment.com
http://UpdegraffDevelopment.com Real Estate Investment & Property Management, Rochester NY


Silvia Barber

Feb 26 '10, 04:47 AM


Thanks Mark. I do have the NOLO book you are talking about and I understand the depreciation vs repair deductions once the house is rented out. But I am still confused.. it says start up costs are for the period before the property is offered for rent. I also understand that appliances and such would be considered a depretiable item. My confusion is: how do I repair the home so that it IS rentable. If the house does not have a sink or working light fixtures, wouldn't these be considered initial repairs as long as they fall below the $5000.00 mark? I can't offer the home without a sink or without working light fixtures. Do I put an add in the newspaper and then go out and install these. That seems backwards to me.


Edited Jun 26 2010, 11:50


Mark Updegraff Donor

Developer from Rochester, New York

Mar 01 '10, 03:37 AM


Originally posted by Silvia Barber:
Thanks Mark. I do have the NOLO book you are talking about and I understand the depreciation vs repair deductions once the house is rented out. But I am still confused.. it says start up costs are for the period before the property is offered for rent. I also understand that appliances and such would be considered a depretiable item. My confusion is: how do I repair the home so that it IS rentable. If the house does not have a sink or working light fixtures, wouldn't these be considered initial repairs as long as they fall below the $5000.00 mark? I can't offer the home without a sink or without working light fixtures. Do I put an add in the newspaper and then go out and install these. That seems backwards to me.


Glad to hear you have the book! It was a real life saver for me last year... we're still looking into getting a good CPA.

Anyway, It has been 2 years now, so it isn't so fresh on my mind. I also don't have the text in front of me, but I remember using it a lot to work out the logistics of the start up expenses. Sorry I can't be of more help. Stick with the book and you should be OK. I'll be doing my taxes soon, so I'll review what I did and let you know.

Cheers!
Mark


Edited Jun 26 2010, 11:52


Medium_leavesMark Updegraff, Updegraff Development LLC
E-Mail: [email protected]
Telephone: (585) 666-3069
Website: http://www.UpdegraffDevelopment.com
http://UpdegraffDevelopment.com Real Estate Investment & Property Management, Rochester NY


Silvia Barber

Mar 01 '10, 07:40 AM


Thanks Mark.
I'm wondering if it would just be easier to forget the "business" start up aspect and just take all repairs as deductions and improvements as depreciations, as long as the house gets rented out the first year?


Edited Jun 26 2010, 11:52


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