All Forum Posts by: Justin Burch

I bought a house recently as a rental property. I used the realtor to find a tenant in order to fill quickly. The agreement was 84% of the 1st month rent was to go to the agent ($1600 month/rent, $1344 to realtor). The realtor collected the $1600 through her agency, then sent me a check for what was leftover after her fee ($256). That all went as planned, my confusion is the expense and write off portion.

It is pretty easy internally to track the numbers on my own P/L. I simply remove the $1344 to balance my checking account because I never cut a check for that cost. My question is during tax time. Is this an expense write off? Can I write this off and only claim $256 as income, or if I claim the write off do I claim the $1600 in that months income (but $1600 never hit my checking account).

The answer is probably simply, but it is still grey to me. My logic says I should not be able to claim the $1344 expense if I only claim $256 as income.

I appreciate any input.

I bought a rental on November 2, 2016. The house was put "In Service" according to the IRS (as in rent ready) by Thanksgiving, but lets say December 1st. The house was not rented until January 15th 2017. I am working on my taxes now with a CPA and she told me that the 1 month of 2016 depreciation cannot be captured because there was no passive income in 2016. I asked if that 1 month of depreciation can roll into 2017, she said no. I understand generally passive losses must deduct from passive income. But even if I cannot claim this depreciation in 2016 it seems to me the 1 month should at lease roll into 2017 because of the "in service" date.

1st question: When should the depreciation of this property start? "In service" date (Dec 1 2016) or rental start date (Jan 15, 2017)?

2nd question: Should all rent ready expenses plus certain closing costs be utilized as current year deductions, or be added to the total costs basis depreciation of the property over 27.5 years?

I have read the IRS 527 publication several times, and I do fall under the active participation clause with a MAGI under 100,000 to allow for $25,000 losses against earned income