I thought I remembered hearing that if you purchase a laptop that will be used for investing, that you can write this off as a tax deduction as long as it is used primarily for investing purposes. I have just purchased a laptop recently because I did not have a functioning one previously. I use it to look up properties, run numbers, and access my Cozy to manage my rental. Am i able to deduct this from my taxes?
Side question - I am on my first property now and am almost done with the renovation. I did collect one months rent from the previous tenant before they moved out and i started my renovation, but since then i have not collected any rent from the property as it is in the renovation phase. Does this cause any problems with taxes if i'm writing off most of what I'm spending for the renovation? I'm worried that since it hasn't been rented out for a majority of the time I've owned it and because I do not have any other investment properties currently, that i will not qualify as "an investor".
thanks you for any input that you can give!
Sure you can. I have a friend who runs a dive equipment shop and he puts all his computers as business expenses because he manages his inventory and orders through the computers. If you are accessing your investments I don't see why not.
"I have just purchased a laptop recently because I did not have a functioning one previously."
If you only have one laptop, it's going to be an uphill battle to make the argument that you use it for 100% business use...
@Eamonn McElroy Is there a rule that says it has to be used 100% for business use? I thought i remembered hearing that it just needed to be it's primary use. Seeing as i use my phone for everything "recreational", this computer i would say is going to be 85-90% real estate use.
Generally, mixed use expenses for a trade or business are prorated based on the business use.
85-90% business use year-round for your only laptop seems high if you only own one property.
Some things you're considering "trade or business" related might not be. Time spent reading biggerpockets, browsing the MLS, crunching numbers on potential properties, watching RE videos on YouTube...those are not rental real estate trade or business hours.
Hours spent bookkeeping for the rental, interfacing with your PM, interfacing with contractors, interfacing with tenants, etc are generally ordinary and necessary rental real estate trade or business functions.
Income tax law is complex. Once you reach critical mass it may be beneficial to onboard a professional who can keep you out of trouble and help you with strategy.
@Alex Nelson To highlight what @Eamonn McElroy explained, I recently deducted a laptop that a bought to use exclusively for my business. It's only used for work and I deducted the cost against my self-employment income. At the same time, I have a rental property and use my home computer to communicate with PM, update Excel spreadsheet, pay rental expenses, etc. The total time per year is probably under 5 hours, so the cost of my computer is not deductibel against the rental income because the use for rental activity is negligible. For mixed use, 80% business/20% personal, you need a reasonable method of how you came up with that breakdown.
For the side question, you said --will not qualify as "an investor" -- if you are talking about real estate professional status, I suggest listening to this podcast. This status provides great benefits but is hard to qualify for.
@Eamonn McElroy is technically correct.
Whether you want to be technically correct on relatively small items that are immaterial for your overall tax situation is your decision. In my 20+ years of experience in defending clients audited by the IRS, the IRS has never questioned 100% business use of computers. One time they objected to 100% cell phone use.
I'm NOT suggesting that you should ignore the tax rules. I'm suggesting that some decisions are not worth deliberations, one way or another. A $500 computer may result in a $100 tax savings. Claiming it as being used 50% v. 75% is a $25 decision.