All Forum Posts by: Whitney Leighton

Square footage is roughly 675 for each of the three 1 BR units and 720 for the 2 BR unit. Perhaps it would make sense to split it into quarters for tax purposes.

Hi Caroline,

I had asked on a separate post if points on a rental property are tax-deductible in the year the property was purchased, and this is the answer I got:

"Here's a general guideline:

1. Points Paid for Acquisition of Rental Property: If you paid points to purchase your rental property, generally, you can deduct the entire amount of points in the year of purchase. This deduction is typically claimed on Schedule E of your tax return."

Answers to this question seem pretty conflicting. On the IRS website, it says points paid on the purchase of a rental property can be deducted, but most sources say the amount must be amortized over the life of the loan.  I had planned to amortize the points in the way you describe. Is there a difference between calculating the annual deduction and entering it as "Other Interest Paid" on Schedule E, vs Amortizing? 

I won't be itemizing, so the quarter we occupy will not be deductible this year. If we convert our unit to a rental unit in the future, will the points paid be amortizable at that point?

Can you explain what you mean about paying points when rates are high? We did this to lower the interest rate because it was so high. 

Hi all,

The end of 2023 we purchased a 4-plex with $12224 in discount points on the mortgage. Three of the 1-BR units are rented out and the one 2-BR unit is our primary residence. It is my understanding that for a rental property, the discount points are deductible in the year the property is purchased. We plan to deduct 1/5 of the total ($2444.80) on the Schedule E for each 1-BR unit. What happens if, in the next few years, we decide to move and convert the 2-BR unit to a rental unit? Is the remaining 2/5 of the total paid toward discount points a deductible expense at that point, or will that portion never be deductible?

Whitney

Are mortgage points paid on a rental property deductible the year the property was purchased, or do they have to be depreciated over the life of the loan?

Thanks.

Hi all,

I own a rental property in New Mexico in my name only. Can my boyfriend and I both sign the lease as landlords if he doesn't not co-own the property?

Whitney

Hello all,

I found qualified tenants for my rental property here in NM.  I offered them the apartment and when I did not hear back from them I assumed they had found something else so I offered the space to my second-choice prospective tenant. I drew up the lease agreement and sent it over- they are reviewing it and plan to sign tomorrow. 

Now my first-choice prospective tenants have responded and would like to move forward with a lease agreement.

Is it too late for me to back out of the lease I sent to the other folks? It has not been signed yet by either party and no deposit has been paid.

Thanks-

@Frank Chin

Thanks so much for taking the time to shed some light.

I looked into this a bit and thought the de minimis safe harbor election might be the best for my situation. Unfortunately, the tax site I'm using doesnt support that form or 100% bonus depreciation, so it looks like I'm out of luck unless I decide to start over and re-enter all my info through TurboTax or something else. 

I did notice the section 179 option in the depreciation part of my Schedule E. It seems like a viable option, like you said. I assume I would enter the furnishings all together as a separate depreciable asset associated with this property (so it would be each of the 4 units + another line for the furnishings) and fill in the Section 179 line with their total. I tried to run those numbers through and it didnt affect the P/L for that property at all, so I must be doing something wrong. 

I don't suppose it would be ok to enter "furnishings" under "other expenses" without also attaching a de minimis safe harbor form? The total of all the furnishings is near $5000, so not a lot, but I'm unsure as to whether this might be acceptable. 

Thanks! I decided to set it up as one property including 4 separate depreciable assets, each with a different starting date. This seems to be the most logical breakdown.

When it comes to expensing the furniture, I wasn't quite sure where to include this. I've read that you can use 100% bonus depreciation for Airbnb furnishings, but since the Airbnb thing didn't work out, I assume I should expense them out (or maybe depreciate them?). Would I deduct them as de minimis safe harbor expenses, or just regular expenses? Running through my Turbotax I'm not seeing a place for the de minimis safe harbor deduction, but there is a place at the end of the worksheet where I can enter "other expenses". 

Hi folks,

I purchased a 4-plex in January 2020 with the intention of renting one unit out as an airbnb and the other 3 as regular unfurnished long term rentals. I purchased all the furnishings to get the Airbnb unit set up, but withdrew my Airbnb application when covid hit because I didnt know how things would go. Instead, I ended up renting it out as a long-term unfurnished unit and put all the furnishings in one of the other units and rented it out as a long-term furnished rental. 

In this case, what is the best way to deduct these furnishings? 

Also, should I combine expenses for all 4 units onto one Schedule E, or do I need to create 4 separate Schedule E's for this property? If placed in service dates were different for 2 of the units than from the other 2, then I imagine all 4 would need to be depreciated separately, so I'm thinking 4 separate Schedule E's would be appropriate.  

Hi, folks-

I'm working on my 2020 taxes and I have a few questions. Last January (1/10/20) I purchased a 4-plex. I occupied one unit for 7 months of the year (March-October). In 2020, 2 of the units were rented for the entire 355 days I owned the property, 1 unit was rented for 7 months and 1 unit was rented for 3 months (after I moved out of it). 

It is my understanding that when calculating deductions on my Schedule E for this property I will need to prorate the portion of the 4-plex that I did not occupy. If I'm thinking about this correctly, my non-deductible portion of rental expenses would be 1/4 (units) x 7/12 (months) = 0.15. So I could deduct 0.85 of the repairs, mortgage interest and other expenses. Anyone can confirm that I am on the right track?

Also, the tax software I use asks for the days I occupied the unit and the days it was rented at fair market value. Not quite sure how to figure this for a 4-plex. 355 days rented and 214 days occupied by me? Will my answer to this question affect my numbers somehow?

Lastly, am I to manually adjust numbers based on my above ratios as I'm entering numbers for repairs, etc? Multiply each deduction by .85 as I go along? And when it comes to mortgage interest, will it be a red flag if I manually enter a number that is .85 of the value on my 1098 form? 

Any input would really be appreciated. This is a tax issue I haven't personally run into before. 

Thanks!