Depreciation, some questions

[Rik Hunter]

The backstory is that I bought a duplex in 2014, and I've taken depreciation on something at some point in some way in TurboTax, lol. This year I did lots of rehab, mostly interior, and I've been trying to be much better at bookkeeping.

Since April, I've rehabbed both unit, included new appliances, and I just finished "The Book on Tax Strategies." I knew the chapter on depreciation would be important, but I'm still a little confused, and I'm pretty sure I'll need to find a REI-friendly tax specialist this year.

But basically, while taking depreciation on the building, how do you also take depreciation on items like appliances and flooring? 

[Bill Brandt]

You make a separate line item for each thing that needs to be depreciated and look at the irs guidelines for how long they have to be depreciated over. Most good tax software should have many of those answers but I’ve used a cpa for the last 10 years so my info is out of date. Make sure you’ve been claiming depreciation every year since purchase and only depreciating the building, not the goal purchase price which includes the land. (Except in most condos and townhomes.)

The irs will pretend you’ve been taking depreciation when you sell even if you don’t. So you’ll be taxed on it. 

[Bill Hampton]

Rik,

I recommend finding an accountant who specializes in real estate taxation. You may want to consider working with your accountant remotely to expand your options.

I would also recommend looking for a tax strategist who is willing to work with you throughout the year, not just when preparing your tax return. You want an accountant that can help you strategize and who is responsive when you want to know the tax consequences of the decisions you are making throughout the year.

Good luck and let me know if you have any questions.

[Ashish Acharya]

Originally posted by @Rik Hunter:

The backstory is that I bought a duplex in 2014, and I've taken depreciation on something at some point in some way in TurboTax, lol. This year I did lots of rehab, mostly interior, and I've been trying to be much better at bookkeeping.

Since April, I've rehabbed both unit, included new appliances, and I just finished "The Book on Tax Strategies." I knew the chapter on depreciation would be important, but I'm still a little confused, and I'm pretty sure I'll need to find a REI-friendly tax specialist this year.

But basically, while taking depreciation on the building, how do you also take depreciation on items like appliances and flooring? 

 You add the new appliances as new assets and depreciate them. 

If the work you did inside the house is improvements, you would creat new asset names building improvements and depreciate it. 

[Aaron Zimmerman]

You may also be eligible for bonus depreciation as well on anything that's less than 20 year useful life. I'd recommend getting an accountant so you can maximize those deductions. 

[Basit Siddiqi]

@Rik Hunter

There are like going to be what-if scenarios when going through your example.

Is the duplex both for tenants or are you house-hacking one of the units?
Regarding depreciation - it will depend on if the units were "in service" at the time of the rehab.

There is regular depreciation, bonus depreciation and potential immediate write off with some safe harbor.

If you did the tax returns yourself, you may want your future accountant to review your prior year tax returns.

[Ola Dantis]

I would even bother with this... It's best to find an accountant to deal with it, as this is what they do day in day out. 

Why give yourself an unnecessary headache in the quest of saving a few dollars. Honestly, you can find accountants who wouldn't charge a lot to file your taxes. 

I love Turbo Tax but I think there are still some forms and real estate investing tax filings scenarios that are difficult to file using Turbo Tax.