Skip to content
Tax, SDIRAs & Cost Segregation

User Stats

44
Posts
20
Votes
Michael Moreno
  • New to Real Estate
  • San Antonio, TX
20
Votes |
44
Posts

Seeking Advice on Amending Tax Return for Rental Property Expenses

Michael Moreno
  • New to Real Estate
  • San Antonio, TX
Posted Apr 6 2024, 14:02

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!

User Stats

4,740
Posts
5,354
Votes
Michael Plaks
Pro Member
#1 Tax, SDIRAs & Cost Segregation Contributor
  • Tax Accountant / Enrolled Agent
  • Houston, TX
5,354
Votes |
4,740
Posts
Michael Plaks
Pro Member
#1 Tax, SDIRAs & Cost Segregation Contributor
  • Tax Accountant / Enrolled Agent
  • Houston, TX
Replied Apr 6 2024, 21:28

@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.

User Stats

44
Posts
20
Votes
Michael Moreno
  • New to Real Estate
  • San Antonio, TX
20
Votes |
44
Posts
Michael Moreno
  • New to Real Estate
  • San Antonio, TX
Replied Apr 6 2024, 22:41
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.  

BiggerPockets logo
BiggerPockets
|
Sponsored
Find an investor-friendly agent in your market TODAY Get matched with our network of trusted, local, investor friendly agents in under 2 minutes

User Stats

4,740
Posts
5,354
Votes
Michael Plaks
Pro Member
#1 Tax, SDIRAs & Cost Segregation Contributor
  • Tax Accountant / Enrolled Agent
  • Houston, TX
5,354
Votes |
4,740
Posts
Michael Plaks
Pro Member
#1 Tax, SDIRAs & Cost Segregation Contributor
  • Tax Accountant / Enrolled Agent
  • Houston, TX
Replied Apr 6 2024, 23:37
Quote from @Michael Moreno:

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.  

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.

User Stats

77
Posts
80
Votes
Benjamin Weinhart
Tax & Financial Services
  • Accountant
  • Cincinnati OH 45209, USA
80
Votes |
77
Posts
Benjamin Weinhart
Tax & Financial Services
  • Accountant
  • Cincinnati OH 45209, USA
Replied Apr 7 2024, 08:17
Quote from @Michael Plaks:
Quote from @Michael Moreno:

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.  

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.

User Stats

44
Posts
20
Votes
Michael Moreno
  • New to Real Estate
  • San Antonio, TX
20
Votes |
44
Posts
Michael Moreno
  • New to Real Estate
  • San Antonio, TX
Replied Apr 7 2024, 14:24
Quote from @Benjamin Weinhart:
Quote from @Michael Plaks:
Quote from @Michael Moreno:

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.  

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?

User Stats

44
Posts
20
Votes
Michael Moreno
  • New to Real Estate
  • San Antonio, TX
20
Votes |
44
Posts
Michael Moreno
  • New to Real Estate
  • San Antonio, TX
Replied Apr 7 2024, 14:24
Quote from @Michael Plaks:
Quote from @Michael Moreno:

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.  

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! 

User Stats

77
Posts
80
Votes
Benjamin Weinhart
Tax & Financial Services
  • Accountant
  • Cincinnati OH 45209, USA
80
Votes |
77
Posts
Benjamin Weinhart
Tax & Financial Services
  • Accountant
  • Cincinnati OH 45209, USA
Replied Apr 7 2024, 18:30
Quote from @Michael Moreno:
Quote from @Benjamin Weinhart:
Quote from @Michael Plaks:
Quote from @Michael Moreno:

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.  

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?


 It's possible they might go in one of the dedicated columns depending on what exactly they are, but generally speaking, yes. Just be sure to include Sec. 1.263(a)-1(f) de minimis safe harbor election when you go to file your return to be eligible for this type of asset treatment.

User Stats

4,740
Posts
5,354
Votes
Michael Plaks
Pro Member
#1 Tax, SDIRAs & Cost Segregation Contributor
  • Tax Accountant / Enrolled Agent
  • Houston, TX
5,354
Votes |
4,740
Posts
Michael Plaks
Pro Member
#1 Tax, SDIRAs & Cost Segregation Contributor
  • Tax Accountant / Enrolled Agent
  • Houston, TX
Replied Apr 8 2024, 08:17

@Michael Moreno

You're missing the critical piece which I have to repeat:  

"Just be aware that you cannot create a loss. You can only wipe out your rental income down to zero but not go below zero."