Just SLIGHTLY overwhelmed with taxes this year

8 Replies

Hows it going BP? Alright, I always find my posts to be way longer than they need to be, so I'm going too try and make this as short and sweet as possible.

Basically, I've always done my taxes myself (turbotax), and never had an issue.  I actually really enjoy doing them.  I'm a total numbers geek. But my previous returns were very simple, basically just my W2 income, and thats it (short of one year I did itemized deductions for tools for my job)

Now THIS year, I've purchased a 2 family home (in July 2017) in Rhode Island that I will "House Hack". I inherited tenants, and have 8K of income to claim.  I also have over 12k expenses that I've made since closing to the end of the year.  I talked to a few CPA's who said that with only one property, I shouldn't have any problems doing it on turbo tax myself again.  But I'm realizing that its a bit more complicated than I thought. Between having to depreciate items over their useful life (27.5 years).  To only being able to partially deduct things to common areas because it will be considered my primary residence.  To not being able to write off ANY improvements to my unit.  Although, my theory is that the improvements I'm making to my unit are to increase rent value for future tenant.  I only intend to live in unit for 1-2 years.  So will I be able to take these deductions in a different tax year? (when its rented). 

I'm pretty sure I'm just going to end up using a tax professional. I just wanted the 2 cents of you guys first.  That's just the start of a list of questions that I'm unsure about with this tax season.  But it's enough to start for now, haha

Also, if there are any CPA's that focus heavily in real estate in the East Bay of Rhode Island, or anywhere in RI really, I'd appreciate any recommendations. 

@Matt Romano

Congrats on the home purchase!

There are a couple things that may make your return complex

1) You now need to prepare a schedule E that will require you to report your rental income/expenses
2) You will also need to prepare schedule 4562 which calculates the depreciation. 
You can only take a portion of the property for depreciation purposes since it is also a personal residence.
3) Depending on if you have a loss and how much your W-2 Income is, you may potentially have to suspend the loss.
4) The fact that you house hack along with making improvements makes things slightly more complex.
You are able to expense/capitalize items directly attributable to the rental property. Furthermore; you are able to prorate expense/capitalize items indirectly attributable to the rental property.

Thanks @Basit Siddiqi So being that it's an owner occupied rental property, definitely makes it more complicated than if it were JUST a rental.  I don't live in the property yet, the unit where I'll reside is currently vacant. But because I DO intend to live there, regardless of for how long.  I will have to refrain from making those deductions until it becomes rented?  As long as I will still be able to make them I suppose 

Originally posted by @Matt Romano :

Hows it going BP? Alright, I always find my posts to be way longer than they need to be, so I'm going too try and make this as short and sweet as possible.

Basically, I've always done my taxes myself (turbotax), and never had an issue.  I actually really enjoy doing them.  I'm a total numbers geek. But my previous returns were very simple, basically just my W2 income, and thats it (short of one year I did itemized deductions for tools for my job)

Now THIS year, I've purchased a 2 family home (in July 2017) in Rhode Island that I will "House Hack". I inherited tenants, and have 8K of income to claim.  I also have over 12k expenses that I've made since closing to the end of the year.  I talked to a few CPA's who said that with only one property, I shouldn't have any problems doing it on turbo tax myself again.  But I'm realizing that its a bit more complicated than I thought. Between having to depreciate items over their useful life (27.5 years).  To only being able to partially deduct things to common areas because it will be considered my primary residence.  To not being able to write off ANY improvements to my unit.  Although, my theory is that the improvements I'm making to my unit are to increase rent value for future tenant.  I only intend to live in unit for 1-2 years.  So will I be able to take these deductions in a different tax year? (when its rented). 

I'm pretty sure I'm just going to end up using a tax professional. I just wanted the 2 cents of you guys first.  That's just the start of a list of questions that I'm unsure about with this tax season.  But it's enough to start for now, haha

Also, if there are any CPA's that focus heavily in real estate in the East Bay of Rhode Island, or anywhere in RI really, I'd appreciate any recommendations. 

I know a great RE CPA in Providence to recommend. I don't know if he's taking on new clients this time of year, but PM if you would like his info 

Hey @Matt Romano, congrats on getting in the game. I invest in RI as well and know the east bay well. Try Falcon Associates in Fall River, they handle RI as well, know investor tax issues and are inexpensive. 508-678- 3022. I'm in Barrington regularly so let me know if you have any questions or want to grab a coffee and talk shop.

@Matt Romano

You can't deduct expenses related to the rental property until the unit is suitable for rent and it is advertised for rent.

Spending the money on a CPA is money in the bank. 

@Brandon Ingegneri makes total sense.  I have an appointment with a great CPA next week.  So I can rest assured that it'll be worth it.  

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