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Sole Proprietor and Taxes
I just purchased my first investment property. It is a duplex with a tenant already living in one side. I set up a separate bank account to have the tenant deposit the rent into. I also had an agent give me the tip that I also “pay myself rent” each month to start saving money. Therefore, if rent is $1,000, then I will also “pay” $1,000 to this account. My question is: is this wise with respect to reporting for taxes given I am a sole proprietor? Or am I making it appear like I am making more on the side that I really am?
My other question is what can I expect for tax benefits at the end of the tax year? I’ve been pouring money into this property for updates, and saving all of my receipts so far, but what will my first year look like?
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Certain expenses will be deducted in the current year, while others will be capitalized and depreciated, which means that you record a portion of the expenses over multiple years.
Try to work with a CPA who can provide a detailed spreadsheet of income and expenses that are required to be listed on your tax return. Very few CPA's specialize in house hacking but you can find them here on BP.
- Daniel Hyman
