Tax strategy for house hacking SFR

[Jim S.]

For background I recently purchased a 5bd/2ba in Denver which I plan to live in myself (got a 5% down no PMI HomeReady loan for it) as well as rent out the remaining 4 bds by the room. Plan is to rent 2 unfurnished/6 mo leases + 2 furnished short term/AirBNB.

My house just closed last week and now I'm in the process of fixing it up cosmetically (drywalling over old 50's ceiling tile, ripping up old carpet + refinishing the hardwood underneath, painting, new floors everywhere that doesn't have hardwood). Overall after $7500-10k in fix-up expenses I expect that I'll be able to cashflow on the property while living there for free (PITI = $1400/mo, projected avg monthly income w/ vacancy = $2,100).

The plan is to continue fixing it up for the next 1-2 years then rent it out in full (either still by the room appointing a roommate as a PM or just rent the whole house). I expect I'll accrue a bunch of tax losses which I can start taking (using the $25k rule) once I start renting the property for a full calendar year.

Now for my actual tax questions:

1. Will I regret doing the repairs before actually getting a renter, i.e. should I post it on Craigslist before I start paying for these repairs so it doesn't get classed as start-up expenses? 
2. Can I claim that $5k first year startup cost deduction if it's for future rentals but is also my primary home?
3. If I don't expect any rental income for 2017 but all of my repairs happen in 2017 will that cause me to lose any of these deductions given that it's 100% my primary residence for that tax year? If I'm only using one room of the 5 I plan to rent and the others are vacant due to work being done should I consider my "personal" usage to be 20% for the first year?
4. I assume I can count all my mileage as expenses (driving from my current apartment to the house to do work, trips to home depot, etc.)?
5. Tools for DIY projects, i.e. paint brushes, ladders, drills, etc. used specifically to improve the property. Can I call it a repair/operating expense? Will still be cheaper than hiring contractors to do it all.

I know I should probably start working with an accountant but I just want to make sure I'm not shooting myself in the foot tax-wise with anything I do in the next month.

[Nicholas Aiola]

Hey, @Jim S. ! I'll echo Lance in saying it is definitely super important to start working with a CPA sooner rather than later. With that said, I'll be happy to address your questions...

1. You should DEFINITELY post an ad on Craigslist or wherever you intend to advertise before doing any work on the property. As long as the property is advertised for rent, you can deduct allowable expenses as rental real estate expenses, as opposed to lumping them into start-up costs.
   
2. If you are not advertising the other rooms for rent and are not planning on renting any rooms out in 2017, no rental real estate deductions can be taken, including start-up costs. If it will be advertised and rented out, you would be able to deduct 80% of relative expenses (assuming you will only be occupying one out of the five rooms). Keep in mind that you are allowed to expense the first $5,000 of start-up costs only if your total start-up costs are $50,000 or less. After that, the $5,000 allowable expense begins to phase out.
   
3. Again, as long as the property is advertised for rent and you fully intend on renting the other rooms out, you can deduct the allowable expenses in 2017. Now, this doesn't mean you can advertise the rooms for ten years, never actually rent them out, but still claim rental real estate tax deductions year in and year out; but in your current situation, it makes sense - given that there is a little over a month left in the year and you are doing some work to the property, it makes sense that you may not be able to rent out every room by year-end. Your personal use would be 20%.
4. Generally, mileage and local transportation expenses incurred when tending to rental properties are deductible. One exception to the deductibility of driving from your current apartment to the new house would be if you don't have a home office in your current apartment; if you don't have a home office, the IRS considers trips from your current home to a rental property to be "commuting", in which case the mileage is not deductible.
5. Tools and supplies are generally deductible expenses. If you are buying tools and supplies for repairs and maintenance that will only be done in a "rental" area/room in the house, you can deduct 100% of those costs; if it's for both a personal and rental area of the house (e.g., common area, bathrooms, exterior, etc.), a portion will be considered nondeductible since the repairs and maintenance are for you, personally, too.

Hopefully, this helps and good luck with your new house!