Real Estate Investment Tax Expenses

Tax, SDIRAs & Cost Segregation
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Real Estate Investment Tax Expenses

Matt Andrew
Rental Property Investor · New Bedford, MA · Member since 2016 · 14 posts · 11 votes

Hello,

I am trying to figure out where real estate investment expenses not tied directly to a specific rental property would be placed (example: Cost of Mailers when prospecting for more properties).  I currently have a 3 family and file a schedule E for all expenses associated with the property, but am spending money on prospecting.  Would Cost of mailers go under the advertising section on the schedule E?  Any help would be great.

Thank you!

Matt

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Alvin Sylvain
Los Angeles · Member since 2018 · 466 posts · 471 votes
8y
@Matt Andrew Advertising.
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  • Alvin Sylvain
    Los Angeles · Member since 2018 · 466 posts · 471 votes
    8y
    @Matt Andrew Advertising.
    2Reply
  • Alvin Sylvain
    Los Angeles · Member since 2018 · 466 posts · 471 votes
    8y
    @Matt Andrew I forgot to point out that I am NOT a tax professional.
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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · Sarasota, FL · Member since 2017 · 5k+ posts · 3k+ votes
    8y

    @Matt Andrew , 

    As simple as the expense sounds, it is not that simple. 

    From a practical standpoint, many professional and tax preparers will just expense it under advertising. The amount is generally immaterial, so it is ignored. 

    But if your advertising is getting bigger, it has to be accounted for properly. If you had a flipping business, it would be advertising expense under schedule C because adv is overall expense for your flip business

    But having a rental property is not considered a business, so advertising expenses to acquire next property cannot be netted against the property you already have. the adv expense is not related to that one speciSchedule E activity. 

    The expense of looking for the next property is considered personal expense unless you have identified one specific property that you are pursuing. Once you identify, the expenses related to acquiring the property is added to the basis of the property. 

    People dont follow this, but if your advertising expense is growing, it might be a red flag to IRS. 

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