Accounting or Tax Question

4 Replies

Hello there. 

 I have two questions. 

1.  I bought a property towards the end of 2017 and started rehabbing it and now it’s almost done and will be ready for a tenant next week.  Will an accountant know how to perform tax write off‘s as in 2017 only expenses occurred no income, if it helps I purchased it as an investment property and paid 20% down. 

2. My current small business accountant who I believe is not an expert when it comes to rental property investment Taxes.  Of course if I approach her and give her the details regarding my purchase of an investment property she would say that she has many rent rental property accounts and she can handle it, but somehow I want to get the rental property taxes done from an accountant who is a real estate in messenger himself/herself.   So my question is, can I get just the rental property taxes (a certain schedule?) done from a Real estate investor accountant and turn that in to my small business accountant as she will be filing my personal taxes as well as small business taxes. I tried my best not to confuse anybody, I hope I can receive some help. 

Thank you. 

@Lakshay G. I would find an accountant who specializes in REI.

None that I know of would only prepare that schedule for you- it's way too much liability for us. I won't do work where I can't control the end return of how it's filed. 

And- An accountant should hopefully not write off those expenses in 2017; as these were costs to get the rental ready for service. They would typically be capitalized and depreciated as part of the value of the home. There are some exceptions and it relates to if/when the home was available/ready/advertised ect. 

1. Your rental property is not a business until it is placed in service. This means it has to be both ready and held out for rent. From your description above it does not seem that your property was ready and held out for rent in 2017 - therefore you would not be able to deduct expenses on your 2017 tax return. Talk to your tax pro about the specifics of your situation to be sure.

2. It is technically feasible, but I don't know any tax preparers who would agree to do a partial return and then turn it over to another firm. On the flip side, I'd be hesitant to accept someone as a client who walked in and said, "Here are my real estate investment forms from another preparer, can you complete the return now?"  

@Lakshay G.

1) The rehab costs that you are talking about should be capitalized and added to your depreciable basis. 
I am not sure an accountant will want to take on that exposure/liability for preparing a return incorrectly.

2) There are often cases where an accountant prepares a return/form and another accounting firm reviews the form. The reason for this is sometimes it is cheaper for a small firm to prepare a form while a large firm will review the firm. The purposes for this is to have overall costs to be lower than if the larger firm prepared and reviewed the return>

If you are considering to make a move to investing in real estate - you may want to reach out to an accountant who specializes in real estate.

Basit Siddiqi, CPA
917-280-8544

thank you everyone. I really appreciate it. 

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