hey guys! so im in the beginning beginning stages of my real estate career. I just recently bought a house im in the middle of trying to flip that I bought 2 months ago. I opened my own LLC in December and I was wondering despite the fact that I haven't sold a property yet or collected any rental income am I entitled to any tax breaks or write offs? or should I wait until next year when I've actually made profits made to hire an accountant. I don't know much about taxes but I've read that gas, food and a home office is tax deductible. any info would be appreciated. thanks!
There is a lot to explain, so probably you should get with a tax accountant.
The short answer is: expenses specifically related to this property (purchase, rehab, holding costs etc.) should be shelved until next year and deducted against the sale price. All general expenses (marketing, driving, technology etc.) are deductible in 2017.
That is assuming you will flip it, as opposed to keep it as a rental. Very different rules with rentals. If you're not sure yet - then the best course of action is to file an IRS extension and complete the return later.
Extension may be necessary either way, so you can connect with one of us tax experts. Right now, a few days before the IRS deadline, we are all too busy.
@Michael Plaks thanks so much for the advice I’ll look into it!
@Felix L Perez
It is okay if you are not proficient in tax - you can easily hire a tax accountant to help you.
I am not good at plumbing and I would never dare to try to fix my plumbing issues.
If you are involved in a flip that you acquired the property in 2018 - there won't be any benefit that you can use to do on your 2017 return.
Expenses that are ordinary and necessary are deductible. If gas, food and a home office are ordinary and necessary for a flipper - they can be considered deductible(or in your case added to basis).
What @Basit Siddiqi said is not necessarily correct. The key is when you started operating - i.e. actively looking for deals. If it was in December - then you may have deductible expenses in 2017.
"Added to basis" means not deductible but reserved for the future. This concept applies to rentals, not to flips.
All of that really should be discussed case by case, we're giving you very generic tips.
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