Capital expenditure for Residential real estate purchase?

9 Replies

I bought a property that has a house and a warehouse on the land. I lease the warehouse to a business for $3k/mo and lease the house to a private resident for $2.7k/mo. Property is in unincorporated county land with no zoning restrictions, but it's part of an HOA. Can this property be considered commercial real estate for tax purposes and be written off as a capital expenditure on a 30+ year depreciation schedule?

Originally posted by @Lance Lvovsky :

@Ocean Zhang

Why would you not want to depreciate the house over 27.5 years? The commercial can be - 39 years.

I would love to depreciate over 27.5 years, but I thought I could not depreciate residential property purchase price as a capital expenditure 

 

Originally posted by @Eamonn McElroy :

@Ocean Zhang

You cannot expense the entire purchase price of a building in year one -- residential or commercial.

Improvements after acquisition are another matter.

 Understood. I'm not trying to expense the purchase price. I want to depreciate the purchase price as a capital expenditure. I can ONLY do that for commercial properties. My question is, can this property be considered commercial for tax purposes if it has a commercial lease for 1 unit and a residential lease for another unit? 

@Ocean Zhang

"I can ONLY do that for commercial properties."

No....that's incorrect....

Residential real estate is an asset depreciable over 27.5 years under GDS.

Non-residential real estate is an asset depreciable over 39 years under GDS.

I think you're a little bit lost...

"My question is, can this property be considered commercial for tax purposes if it has a commercial lease for 1 unit and a residential lease for another unit?"

Is this one building or multiple buildings?  If multiple buildings, you do not have "units."  You have distinct buildings which are separate units of property.

I think you should talk to a talk pro...